By Lisa Jucca
DAVOS, Switzerland, Jan 31 (Reuters) - UniCredit has a strong enough balance sheet and is not sounding the market out for additional capital that would be dilutive to its shareholders, the Italian bank's deputy chief told Reuters.
The bank, however, may take advantage of non-dilutive government aid plans in its core Italian and Austrian markets to be in line with other banks, or if pushed by market expectations.
'We are certainly not sounding (out) the market in order to do another capital increase,' Deputy Chief Executive Sergio Ermotti said in an interview on the sidelines of the World Economic Forum in Davos.
'We are definitely not considering any capital increase that could be dilutive,' he added.
Ermotti said the bank may consider tapping state aid in Italy or Austria, but not in Germany and Poland. These four countries make up 80 percent of its revenues, with the rest spread across several countries in central and eastern Europe.
'From a practical point of view, such a situation is to be ruled out in Poland or in Germany, where we have a solid position both on the capital side and on the deposits. It's either going to be Austria or Italy,' he said.
'But we would not do it because we are in need of additional capital,' he added.
PUSH FOR CASH
Ermotti said the raft of government measures to prop up banks in various countries had created a somewhat uneven playing field, and market expectations were pushing some players who had so far declined state help to consider it.
'If this is necessary to create a buffer or because, at the end of the day, the market wants to see that, we will consider such steps. But not because we expect a deterioration of our balance sheet,' he added.
Ermotti also said that UniCredit, which, like many banks, is aggressively downsizing its investment banking division, will reduce its proprietary trading account and other lines of business to concentrate on servicing its corporate clients.
'Any prop trading activity will be further reduced,' he said.
Ermotti said he did not see a generalised deterioration for UniCredit's business in central and eastern Europe, where UniCredit is the leading bank, adding that the Italian bank was ahead of its budget in problematic spots, like Ukraine.
'There are difficulties, but there is not a generalised crash. In countries that have been hit hard, we were either not present or we have been able to handle the situation,' he said.
For full coverage, blogs and TV from Davos go to http://www.reuters.com/davos
(Editing by Simon Jessop) Keywords: DAVOS/UNICREDIT
(Davos newsroom +41 81413 7937; elisabetta.jucca@reuters.com)
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