By Paola Arosio and Gianluca Semeraro
MILAN (Reuters) - Italy's biggest bank, UniCredit, is to start looking for a potential external successor to Chief Executive Federico Ghizzoni to head off pressure from top investors and soothe government concerns, sources said on Wednesday.
A group of disgruntled shareholders asked UniCredit Chairman Giuseppe Vita to begin a search for a new CEO in a closed-door meeting on Monday, the sources said.
The Italian government, which hastily set up a bank rescue fund last month, is keeping a wary eye on developments at the bank given that prolonged uncertainty at UniCredit could unsettle the whole sector, one of the sources said.
UniCredit plans to hire a headhunter to find a successor to Ghizzoni, three sources said. Ghizzoni faces growing discontent over the bank's weak share price, stretched capital position and low profitability compared to rival Intesa Sanpaolo (MI:ISP).
Some of the bank's leading shareholders want to find a new chief who can carry out a restructuring, said a source familiar with Monday's discussions. They are open to hiring a foreigner, though they would prefer another Italian, the source added.
However, there is a consensus among the shareholders that candidates should come from outside the bank, the sources said.
A UniCredit spokesman declined to comment.
Among those seen as potential successors, sources have cited UBS's investment banking boss, Andrea Orcel, the head of Mediobanca, Alberto Nagel, and Merrill Lynch's Italy chief, Marco Morelli.
Nagel and Morelli were not immediately available for comment. UBS said it does not comment on market speculation.
Reports of investor dissatisfaction with Ghizzoni have dogged the bank for months as UniCredit, Italy's only globally systemically important financial institution, has failed to put to rest worries it may need a capital increase.
Pressure grew on Ghizzoni last week after UniCredit reported a dip in its core capital at the end of the first quarter. The stock has lost 44 percent this year, faring worse than Italy's banking index.
The bank's decision to be the sole guarantor of a risky 1.5 billion euros (1.2 billion pounds) capital increase at mid-tier lender Banca Popolare di Vicenza has also been questioned.
UniCredit, whose biggest shareholder is Abu Dhabi sovereign fund Aabar, risked having to raise capital of its own to cover the Vicenza share sale, but was saved by the state-backed rescue fund which ended up subscribing to 99 percent of the issue.
An Italian official has said banks like UniCredit need to reform and can't rely on Atlante to solve long-term problems.
Lenders need to overhaul their business models to survive in the zero interest rate world of the euro zone, he said in comments made this month.
Asked about reports of his possible exit, Ghizzoni said on May 10 that it was up to shareholders and the board to decide.
He said the bank had followed standard procedures for the underwriting of the Vicenza cash call and that the UniCredit board "appreciated the explanations I provided and understood the sense of the transaction."