Alessandro Profumo, who built UniCredit SpA into Italy’s largest bank during 13 years as chief executive officer, may step down at a board meeting today after losing the support of some investors, said two people with knowledge of the matter.
The board will probably accept Profumo’s resignation and appoint Chairman Dieter Rampl to run the bank on an interim basis, said the people, who declined to be identified because the matter is private. Recent Libyan investments in Milan-based UniCredit have triggered opposition from some banking foundations that hold the company’s shares. The board meets at 6 p.m. Milan time.
“There’s a power struggle between the top management and the banking foundations who claim that Profumo is managing the bank by himself without being influenced by them,” said Wolfram Mrowetz, who oversees 200 million euros ($261 million) as head of investment firm Alisei SIM in Milan. “The entrance of the Libyans makes the foundations afraid of losing more power and they blame Profumo for this.”
UniCredit fell as much as 4 percent, and was down 1.9 percent at 1.90 euros at 10:12 a.m. in Milan, giving the company a market value of 36.7 billion euros. The Bloomberg Banks and Financial Services Index advanced 2 percent in the past six months, compared with UniCredit’s 11 percent decline.
Profumo, 53, a former McKinsey & Co. consultant, became CEO of Credito Italiano in 1997 and transformed the northern Italian lender into UniCredit, a bank with businesses stretching from the U.S. to Kazakhstan. His frictions with investors have been building since at least October 2008, when he announced a 6.6 billion-euro capital increase four days after denying the need for more funds.
The tensions worsened this year, when investor pressure in March forced him to delay the approval of a reorganization plan, and matters came to a head over Libya. The Libyan Investment Authority increased its stake in UniCredit to 2.6 percent from 2.1 percent as of Aug. 31, according to filings posted on market regulator Consob’s website. The Central Bank of Libya holds almost 5 percent of UniCredit.
Profumo’s departure would mean a “hole in the leadership and strategic uncertainty, with the risk of more political influence in business decisions,” Anna Maria Benassi, an analyst at Banca Leonardo, wrote in a note today.
Profumo should have informed other shareholders about the intention of the Libyan investors to raise their stakes, said Flavio Tosi, the mayor of the city of Verona, the biggest shareholder of Fondazione Cariverona, UniCredit’s fourth-largest investor.
“Profumo played the game alone, now the board must take into consideration his behavior,” Tosi said late yesterday.
While UniCredit has fostered relations with Libya, some of his opponents say the bank isn’t doing enough in its home market.
“The bank should provide more support to small companies in Northern Italy and boost local employment,” Tosi said.
Tosi is a member of the Northern League, the party in the governing coalition that has criticized the Libyans’ investment.
Mediobanca SpA CEO Alberto Nagel is one of the potential candidates to replace Profumo, la Repubblica reported today, without saying where it got the information.
Other candidates include Andrea Orcel, Bank of America Corp. Merrill Lynch’s executive chairman of global banking and markets; Giampiero Auletta Armenise, former CEO of Unione di Banche Italiane Scpa; and Enrico Tomaso Cucchiani, a board member of Allianz SE, one of UniCredit’s biggest shareholders, la Repubblica said.
UniCredit’s board originally had been scheduled to meet Sept. 30 to discuss the Libya issue and send a response to Italian regulators seeking information about whether the two Libyan investors were acting independently. UniCredit’s bylaws restrict investor voting rights to 5 percent.
Libyan investors chose “autonomously” to buy the stakes in UniCredit, Profumo told reporters in Milan on Sept. 6. The bank is strengthening its ties to Libya as Prime Minister Silvio Berlusconi fosters trade relations with the country, led by Muammar Qaddafi. The Central Bank of Libya assigned a banking license to UniCredit last month, making it the first foreign bank allowed to operate in the country.
Profumo gained full control of the bank’s board in 1999 by quashing a rebellion by the foundations that had owned the company. Within a year he doubled the company’s return on equity by combining back office computer systems and acquiring businesses in faster growing economies such as Poland and Turkey.
Profumo led the bank’s expansion in Europe from 2004 to 2007 through more than $60 billion of acquisitions, including the purchases of Munich-based HVB Group and Italian rival Capitalia SpA. The spending spree lowered capital ratios, and the strength of the bank’s finances was questioned amid the financial crisis in 2008. Profumo admitted in October of that year that mistakes had been made in underestimating the “length and depth” of the financial crisis, and in buying rivals at the top of the market.
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