Italy's biggest bank has massive loss

Italy's largest bank, Unicredit,is slashing jobs after reporting a massive loss of10.6 billion ($14.73 billion Cdn) in its third quarter.

The bank announcedMondayit will cut 5,200 jobs in Italy by 2015.

The move came as Italy's premier-designate, Mario Monti,began talks to create a new governmentwith the power to pass the tough economic reforms needed to prevent the worlds eighth biggest economy from falling into a full-scale debt crisis.

Unicredit also announced8.7 billion ($12.1 billion) in write downs, including on entire operations in Ukraine and Kazakhstan and on 135 million ($188 million) in Greek debt, and moved to raise 7.5 billion ($10.4 billion) in new capital.

The bank said the write downs had no impact on its capital ratios, or proportion of cash to loans.

But new international rules require banks to increase those ratios, and Unicredit said if it is successful in raising the new capital, it will have a ratio of 10.35 per cent as of Sept. 1, well above the nine per cent level required.

The loss compared with earnings of 335 million ($466 million) in the same period a year earlier.

"The group's quarterly financial performance was significantly hurt by market volatility, which led to a trading loss and an increase in net write downs in loans," the bank said in a statement.

The bank lost 285 million ($396 million) in trading, compared with trading earnings of 381 million ($530 million) a year earlier.

Losses on loans were up 13 per cent to 1.8 billion ($2.5 billion), compared with 1.6 billion ($2.2 billion) in the same period a year ago.