MILAN (Reuters) – UBI Banca UBI.MI aims to nearly double its net profit in the next three years by cutting costs and reducing losses from problem loans, the bank said on Monday.

Under a new plan to boost profitability up to 2022, UBI will lay off 2,030 employees, or around 10% of staff, and close 175 branches.

UBI, Italy’s fifth biggest bank, will also further reduce its share of impaired debt to 5.2% of total lending by the end of 2022, meeting a threshold which has become the new benchmark for lenders across Europe.

Italy’s banks have had to cut costs and reduce bad debts to recover from the country’s deep recession that turned almost a fifth of overall loans sour.

Under UBI’s bad loan clean-up, writedowns of problem loans will roughly halve to 387 million euros (£322.41 million) in 2022.

“This is a major contribution to earnings growth under the plan,” Chief Executive Victor Massiah told a news conference.

UBI will target a 665 million euro ($721 million) net profit in 2022 compared with a 2019 level of 353 million euros net of one-off charges relating to staff cuts and other costs.

Like other European banks UBI is battling with negative interest rates, which it expects to drive down its income from lending by 0.9% on average per year over the period to 2022.

But thanks to higher fees revenues are seen edging marginally higher under the plan, by 0.3% per year.

UBI shares hit a near 15-month high after details of its three-year plan were published and closed up 5.5%.

“Targets are pretty aggressive but feasible,” Fidentiis analyst Fabrizio Bernardi said. He also said the expected dividend yield was appealing.

UBI plans to pay out 40% of it profits to shareholders over the plan period, and will consider additional dividend payments if its core capital allows it.

The bank’s core capital is seen little changed at 12.5% of assets in 2022 after the negative impact of regulatory issues and a boost from property disposals.

“We don’t want to go below 12.5%,” Massiah said.

Considered the strongest among second-tier Italian banks, UBI is expected to play a prominent role in an eventual consolidation round in the sector.

Massiah said that the bank remained open to possible merger options provided they “created value and did not pose governance issues.”

To curb risk from swings in Italian bond prices, UBI said it would lower the proportion of Italian government bonds in its financial investment portfolio to 37% from 51% at present.($1 = 0.9221 euros)