February 8, 2016 / 9:17 AM / 4 years ago

UniCredit's CEO faces growing shareholder disquiet - sources

MILAN (Reuters) - UniCredit’s (CRDI.MI) chief executive, Federico Ghizzoni, has lost the support of several influential shareholders who are frustrated with the bank’s weak share price performance and think he should step aside, according to sources familiar with the matter.

A logo of UniCredit is seen in downtown Milan, August 19, 2014. REUTERS/Stefano Rellandini

Leonardo Del Vecchio, a veteran entrepreneur who holds just under 2 percent of UniCredit and as recently as October had expressed his support for Ghizzoni, became on Monday the first big investor to publicly state the bank may need a new boss.

“Ghizzoni is a good banker,” Del Vecchio told La Repubblica newspaper in an interview.

“But perhaps the bank today needs changes that are so radical that they can only be achieved through discontinuity.”

Echoing Del Vecchio’s view, four sources close to the situation said that Ghizzoni, who has headed Italy’s biggest bank by assets since 2010, has lost the support of several other Italian and foreign shareholders.

Three of the sources said he could be replaced before the bank holds its annual shareholder meeting in mid-April, although one of them said investors were not unanimous on who should succeed him and this could help him stay on longer.

Bankers and the other sources have suggested UBS UBSG.VX Chief Executive Sergio Ermotti, a former UniCredit executive, and the Swiss bank’s investment banking boss Andrea Orcel, as possible candidates for the job. The head of Merrill Lynch in Italy, Marco Morelli, has also been mentioned.

UBS declined to comment while Merrill Lynch in Italy was not immediately available for comment. UniCredit, which releases 2015 results on Tuesday, also declined to comment.

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 to bolster its finances.

Deputy Chairman Luca Cordero di Montezemolo, however, said on Thursday that Ghizzoni had the support of shareholders. Asked about Del Vecchio’s statement on Monday, he declined to comment.

The bank compares unfavourably with domestic rival Intesa Sanpaolo (ISP.MI), which makes twice as much profit and has a higher core capital level. UniCredit has also paid out scrip dividends for the past two years.

With Italian banking shares suffering a sell-off due to concerns about their pile of bad loans, UniCredit shares have lost nearly 40 percent of their value since the start of 2016.

The bank, which has operations in 17 countries, became Italy’s most successful international lender under Ghizzoni’s predecessor Alessandro Profumo, who between 1999 and 2005 bought several banks in central Europe as well as Germany’s HVB.

Historically such broad international exposure has helped to offset weakness in Italy’s economy. But some now see it as a liability, inflating costs and leaving the bank vulnerable to the volatility of emerging markets like Russia, Ukraine and Turkey.

In an attempt to boost earnings, Ghizzoni presented a new business plan in November announcing 18,000 job cuts and vowing to restructure or sell businesses in Austria and Italy.

He has repeatedly ruled out the need for a capital increase and earlier this month said the bank’s 2015 results were good and in some respects better than expected.

A foreign investor in the bank, who spoke on condition of anonymity due to the sensitivity of the topic, said UniCredit was perceived as lacking capital.

“It’s fair to say that the current CEO is not getting strong support from investors,” the investor said.

“So at this stage, only a good set of full-year results could bring down worries around capital. On the other hand, my feeling is a management change now would raise concerns about a possible capital increase.”

UniCredit’s biggest investor is Abu Dhabi state fund Aabar Investments INPTVA.UL, followed by BlackRock (BLK.N): both have stakes of just over 5 percent. Italian banking foundations are also among the bank’s core shareholders with a combined stake of around 10 percent.

Additional reporting by Francesca Landini and Sinead Cruise; Writing by Silvia Aloisi; Editing by Mark Potter and Rachel Armstrong

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