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UniCredit top investors seek action on CEO, governance - sources

Published 17/05/2016, 12:31
© Reuters. UniCredit bank CEO Ghizzoni waits for an TV interview at the headquater in downtown Milan
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By Gianluca Semeraro and Paola Arosio

MILAN (Reuters) - Major shareholders of UniCredit, Italy's biggest bank by assets, have taken a significant step towards replacing Chief Executive Federico Ghizzoni, by asking the chairman to find ways to strengthen governance, sources said.

The shareholders, representing around 15 percent of the bank, met Chairman Giuseppe Vita on Monday and mandated him to draft a plan in consultation with investors, which includes the option of Ghizzoni's departure, five sources close to the matter said.

Ghizzoni, who has headed UniCredit since 2010, has faced growing shareholder discontent over the bank's weak share price performance, stretched capital position and low profitability when compared to rival Intesa Sanpaolo (MI:ISP).

However, the bank's investors have so far failed to reach an agreement on a successor, the sources said.

"Chairman Giuseppe Vita was given a mandate by shareholders to explore ways to address their grievances," a source said.

"Shareholders recognise that Ghizzoni has worked well in a difficult market environment but they are now convinced that change is needed," the source added.

Ghizzoni attended the meeting with Vita and the investors as well as some board representatives, according to the sources.

The final decision rests with the board and is likely to be taken by the summer, they said.

Sources have suggested UBS Chief Executive Sergio Ermotti, a former UniCredit executive, and the Swiss bank's investment banking boss Andrea Orcel, as possible successors.

The head of Mediobanca, Alberto Nagel, and that of Merrill Lynch in Italy, Marco Morelli, have also been mentioned.

Rumours 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, compared with a 36 percent fall for Italy's banking index.

The bank's governance was also called into question over its decision to be the sole guarantor of a risky 1.5 billion euros capital increase at mid-tier lender Banca Popolare di Vicenza.

UniCredit could have been required to raise capital of its own as a result of underwriting the share sale, but was relieved of this obligation by a newly created bank fund, which ended up with a 99 percent stake in Vicenza as the fund-raising flopped.

Asked about reports about his possible exit, Ghizzoni said on May 10 he felt calm and it was up to shareholders and the board to decide.

© Reuters. UniCredit bank CEO Ghizzoni waits for an TV interview at the headquater in downtown Milan

He said the bank had followed standard procedures for the underwriting of the Vicenza cash call and that the board "appreciated the explanations I provided and understood the sense of the transaction."

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