Italian bank UniCredit SpA is abandoning its western European equities sales and trading business, cutting more than a hundred jobs and handing French brokerage Kepler Capital Markets the right to service its clients.

The move comes a day after UniCredit unveiled a 7.5 billion euro ($10.2 billion) rights issue, thousands of layoffs and a retrenchment in its investment banking business.

The western European equities sales, trading and research team, made up of about 120 people, will be axed under the deal with Kepler, according to two sources.

Employees called together in a meeting had their Blackberries reset, their building passes switched off and were told not to return to their desks, two sources familiar with the situation said.

I was halfway through a ... report when I went to the meeting. It was like something out of (the film) Wall Street, said a person who had been in one of the meetings on Monday.

About half of those staff worked in London and the rest in Italy, Germany and Austria.

The deal with Kepler, which is just over 50 percent owned by its staff after a management buy-out in 2008, will give UniCredit access to investors and will mean it can continue to produce equity research.

The Italian bank retains its own equity capital markets team as part of its investment bank, which advises clients on rights issues and initial public offerings.

The decision to chop out an entire business and go for a partnership instead reflects some of the tough calls many rival investment banks are contemplating.

It's better for us to come clean. A lot of the banks are going towards this model but haven't made the decision. We wanted to turn the page, Jean-Pierre Mustier, head of UniCredit's corporate and investment bank, told Reuters.

Rivals like Switzerland's Credit Suisse and UBS have largely cut into their capital-guzzling fixed income trading divisions, not their equity businesses where new regulatory requirements bite less.

But the bank had found it difficult to work in equities without having a very wide presence, Mustier said, and would instead look to bolster its reach in credit.

It would rein in lending only where we feel there is not enough profitability, Mustier said and was now close to where it wants to be in investment banking.

CEE STILL INTACT

The alliance also provided a better model for managing equities bankers' compensation, Mustier said, as Kepler operated as a partnership, giving it the ability to adjust pay much more quickly in the cyclical business.

Under the terms of the alliance, UniCredit can possibly take a stake in Kepler at a later stage, though for now it is not, one source close to the situation said.

UniCredit is also keeping its own research and sales teams focussed on central and eastern Europe, a region that it is putting even more emphasis on in its strategic overhaul. Roughly 60 people work in that business.

Kepler Capital Markets was founded in Paris in 1997 as the equity brokerage business of Switzerland's Julius Baer and was later owned by Iceland's Landsbanki. It covers 460 stocks as part of its research, and will add another 48 following the deal with Unicredit.

Kepler has 50 research analysts and 80 salespeople and sales traders.

As well as strengthening its capital base, UniCredit is planning to rein in its investment bank and focus on more stable retail and corporate banking in core regions such as Italy, Austria, Germany, Poland, Turkey, Russia and the Czech Republic.

(Editing by David Holmes and Elaine Hardcastle)