UniCredit Chief Profumo Resigns After Losing Investors' Support

UniCredit SpA Chief Executive Officer Alessandro Profumo stepped down, ending his 13-year tenure as head of Italy’s largest bank, after clashing with shareholders over Libyan investments in the company.

Chairman Dieter Rampl, 63, will temporarily assume the CEO duties as he seeks a replacement in coming weeks, the bank said today in a stock-exchange statement.

Profumo, 53, and the bank “agreed the time had come for a change in the top management” of the bank, UniCredit said in the statement following a board meeting that lasted about five hours. Profumo’s wife, Sabina Ratti, told reporters late yesterday that the board requested his resignation and he reached an agreement on his severance payment. She didn’t give details.

Some of UniCredit’s largest shareholders asked Profumo to resign after he failed to tell them of the intention of Libyan investors to raise their stakes, people with knowledge of the discussions said yesterday. The Libyan Investment Authority, a sovereign wealth fund, recently increased its holding in the Milan-based bank by 0.5 percent to 2.6 percent, while the Central Bank of Libya holds almost 5 percent.

Profumo’s departure will 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 yesterday.

Photographer: Giuseppe Aresu/Bloomberg

Unicredit Chief Executive Officer Alessandro Profumo in Milan. Close

Unicredit Chief Executive Officer Alessandro Profumo in Milan.

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Photographer: Giuseppe Aresu/Bloomberg

Unicredit Chief Executive Officer Alessandro Profumo in Milan.

UniCredit fell 41 cents, or 2.1 percent, to 1.90 euros in Milan trading, bringing the decline this year to 15 percent and valuing the company at 36.7 billion euros ($48.2 billion). Intesa Sanpaolo SpA, Italy’s second-largest bank, declined 21 percent this year.

International Purchases

Profumo, a former McKinsey & Co. consultant, used the opening of the European markets brought about by the euro to expand outside of Italy. UniCredit spent about $60 billion on European takeovers from 2005 to 2008 to become the sixth-largest bank in the 16 nations sharing the euro with 954.6 billion euros of assets at the end of June.

Purchases included Munich-based HVB Group AG, Germany’s third-biggest bank. UniCredit also owns the largest lenders in Poland, which is vying to join the euro, and Austria, and operates in 22 countries. The bank also purchased Rome-based Capitalia SpA in 2007, just before the start of the credit crisis.

Rising loan losses in Germany and eastern Europe ate into the bank’s reserves when the financial crisis hit, forcing Profumo to announce a 6.6 billion-euro capital increase in October 2008, four days after denying the need for more funds. At the time, he admitted the mistakes of underestimating the length and depth of the crisis and making acquisitions at the top of the market.

Photographer: Giuseppe Aresu/Bloomberg

Alessandro Profumo, chief executive officer of Unicredit SpA. Close

Alessandro Profumo, chief executive officer of Unicredit SpA.

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Photographer: Giuseppe Aresu/Bloomberg

Alessandro Profumo, chief executive officer of Unicredit SpA.

Profumo tapped investors for funds in January of this year, when the bank raised 4 billion euros in a rights offer.

Shares Tumble

The shares, which more than quadrupled during Profumo’s first two years on the job, have dropped 70 percent from their peak in April 2007. That compares with a 30 percent decline from the pre-crisis high at Banco Santander SA, Spain’s largest bank, which has also pursued an international expansion.

Investor pressure in March forced Profumo to delay the approval of a reorganization plan, and tensions flared again over Libya. He 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.

UniCredit should pay less attention to fostering international ties and more on its home market, especially northern Italy, Tosi said. He is a member of the Northern League, the party in the governing coalition of Prime Minister Silvio Berlusconi that has criticized the Libya investments.

Italian banking foundations are non-profit entities created in 1990, when the country’s government started privatizing state-controlled lenders and sought institutional investors. The foundations are shareholders in Italy’s biggest banks, including UniCredit and Milan-based Intesa Sanpaolo.

Balancing Needs

Born in Genoa to a Sicilian family, Profumo graduated from Milan’s Bocconi University, then spent 10 years at Como, Italy- based Banco Lariano. In 1987, he joined McKinsey’s Milan office as a consultant to financial companies. He then joined Bain Cuneo, another consulting firm, in Milan in 1989.

He became CEO of Credito Italiano in 1997, and transformed the lender into UniCredit, a bank with operations stretching from the U.S. to Kazakhstan.

Balancing the needs of local and international investors will be a challenge for whoever succeeds Profumo, analysts said. The new manager will also have to decide on the future of UniCredit’s Pioneer Global Asset Management unit, after Profumo began reviewing options for the division, including a possible sale.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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