Banca Monte dei Paschi di Siena, Italy's third-biggest bank, has pledged to cut an extra 3,360 jobs and increase capital to win European Union support for €4.1 billion in aid.
Monte Paschi will shed 8,000 staff by 2017, up from a previous goal of 4,640 reductions by 2015, it said on its website.
The Siena-based company will also carry out a €2.5 billion share sale next year and reduce administrative costs by €440m by 2017.
"This is a solid restructuring plan, built upon a strong turnaround track record, clearly identified actions and prudent macroeconomic assumptions," chief executive Fabrizio Viola said on a conference call with analysts.
Viola and Chairman Alessandro Profumo are being forced by European regulators to conduct a more rigorous overhaul of the world's oldest bank than initially planned to secure the state aid.
The two men, appointed last year, sought the cash after their predecessors lost billions of euro on Italian sovereign debt and derivatives contracts.
Monte Paschi's shares advanced as much as 6.7% in Milan, the biggest gain in almost two months.
The bank's new plan also sets a profit goal of about €900m for 2017 and caps management pay at €500,000. The bank already reduced its workforce by 2,700 to 28,473 as of the end of June.
Monte Paschi expects EU approval of its restructuring plan by November 14, it said yesterday.
The bank, whose former managers are the subjects of a fraud probe linked to derivatives contracts, had pledged to present the strategy to EU regulators two weeks ago.
The delay came amid protracted negotiations between Italian and EU officials. In a July letter to Finance Minister Fabrizio Saccomanni, the European regulator recommended executive pay caps, lower costs and cutting Italian sovereign-debt holdings and trading activities.
Monte Paschi said it will use the capital increase to help repay €3 billion of government funds next year and the rest by 2017.
The state aid will be converted into new shares for the government "should market conditions prevent the completion of the capital raising within the time frame set," chief financial Officer Bernardo Mingrone said.
The company agreed last month to more than double the planned capital increase to repay the government. It also said two weeks ago that it suspended interest payments on about €481m of three hybrid notes that are part of its Tier 1 capital, thereby requiring bondholders to contribute to the restructuring.
The bank's capital shortfall came after it made loss-making bets on Italian sovereign debt between 2009 and 2011, either by buying government securities or arranging structured deals underpinned by Italian bonds.
Monte Paschi said it plans to reduce its €23 billion of Italian sovereign debt, the most among the country's biggest banks relative to tangible equity, to about €17 billion in 2017.
The lender has paid back €1 billion from the €29 billion it borrowed in the European Central Bank's long- term refinancing operations, it said in the statement.
Monte Paschi, whose largest shareholder is the Fondazione Monte dei Paschi di Siena, posted a loss of €279.3m in the second quarter as net interest income dropped. The bank, which pays 9% annual interest on the bonds it sold to the government in an initial bailout, must substitute the debt for stock if it is unprofitable this year.
Monte Paschi is asking for the financial support as prosecutors probe how former managers at the company, which piled up losses of €7.9 billion in the past two years, used derivative contracts to obscure over €700m of losses.
Three former executives are on trial for allegedly obstructing regulators by hiding a document on a deal signed with Nomura Holdings in 2009.