ROME (Reuters) - BNP Paribas plans to cut 5 percent of the workforce at its BNL Italian business and close more than 10 percent of its branches there, two union sources said, as the French bank tries to return the division to profit.

BNP Paribas is due to present a new three-year strategy early in 2017 for its main European markets of France, Italy, Belgium and Germany, where in line with peers it has already started to cut costs.

BNL would cut 700 jobs and close 100 branches under its new business plan to 2020, the sources said on Wednesday following a meeting between the bank and union representatives the previous day.

The sources said the redundancies, which would be managed through early retirements, stemmed both from branch closures and from reduced staffing requirements as the use of information technology rises.


"The goal is to increase the bank's profitability," one of the sources said.

Further cost cuts will be achieved by lowering staff incentives by 30 percent over four years and keeping workers at home without pay for a total of 12 days over two years.

In a statement the BNL trade union said the 2017-2020 plan had been presented it on Wednesday.

"The trade union... rejects forcefully and determinedly the proposals laid down," it said.

BNL's headcount stood at 13,397 as of the end of last year, according to an internal BNP document seen by Reuters.

BNL had 812 branches then, according to BNP Paribas' annual report, as well as 121 other specific branches that cover private banking, small and mid-sized businesses and international companies.

Annual pretax income at BNL has declined steadily since 2011 to reach a loss at 28 million euros in 2015. BNL posted a 8 million loss in the first quarter of 2016 and a 65 million euros pretax income in the second quarter.

BNL has refocused its business on "better corporate and small business segments" over the last few years to try to lower loan-loss provisions.

BNP Paribas, France's biggest bank, is heavily exposed to slow-growing mature European markets makes such as Italy, which accounts for about 40 percent of provisions it sets aside for bad loans.

BNP Paribas paid 9 billion euros to acquire control of Banca Nazionale del Lavoro (BNL) in 2006 and had to revive the Italian bank from years of underinvestment.

BNL had no immediate comment. BNP Paribas declined to comment.

Details of the plan were reported earlier on Wednesday by news agency Radiocor.

(Reporting by Stefano Bernabei, writing by Valentina Za and Maya Nikolaeva; Editing by Keith Weir and Adrian Croft)

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