Intesa Sanpaolo SpA (ISP), Italy’s second-biggest bank, appointed Carlo Messina as chief executive officer to replace Enrico Tommaso Cucchiani, who resigned after clashing with shareholders. The stock fell the most in six months.
The management change will “accelerate” the bank’s potential after Cucchiani delivered expected results during a prolonged systemic crisis, Intesa told the Milan stock exchange in a statement today.
Messina, formerly general manager and head of the retail division, will be required to tackle rising bad loans amid Italy’s longest recession in two decades and increasing political instability in the euro region’s third-largest economy. Cucchiani, 63, had clashed with some shareholders during his 21 months in charge as he sought to reduce costs and reorganize the branch network.
“Any incoming management will struggle amid political risk, lack of progress in economic reform and a low interest-rate environment which is particularly punishing for Italian banks (BNK),” Paul Vrouwes, who helps oversee about 5 billion euros ($6.8 billion) in global financial stocks at ING Investment Management in The Hague, Netherlands, said by telephone. “A change brings added uncertainty,” said Vrouwes, who doesn’t own Italian bank shares.
Intesa fell as much as 5.6 percent in Milan, the biggest drop since March 25, and declined 3.5 percent to 1.53 euros at 10:08 a.m., giving the company a market value of 24.8 billion euros. The benchmark FTSE MIB Index (FTSEMIB) dropped 1.7 percent, leading losses in Europe as Italian Prime Minister Enrico Letta fought to save his administration.
The CEO change came as Letta’s stricken government sought a confidence vote due to a rift with Silvio Berlusconi. The political tensions have pushed up Italian bond yields and impaired the country’s ability to deliver on its budget commitments.
“Overlapping Italy’s political instability with yet another management replacement could be taken as a sign of weakness by the market,” Andrea Filtri, an analyst at Mediobanca SpA (MB) in London, wrote in an e-mailed report today, downgrading the stock to “underperform” from “neutral”. “With 114 billion euros of Italian government bonds and practically its entire business in Italy, Intesa is heavily exposed to the country’s fortunes.”
Cucchiani’s departure comes after Intesa’s net income slumped 75 percent in the second quarter from a year earlier to 116 million euros. He resigned after at least one of the company’s top three investors -- all of which are Italian banking foundations --sought to push him out during mounting criticism over his management style, people with knowledge of the matter have said.
Intesa’s stock rose 21 percent since Cucchiani took the helm on Dec. 22, 2011, compared with a 2.4 percent increase for UniCredit SpA (UCG), Italy’s largest bank, and a 42 percent gain in the Bloomberg Banks and Financial Services Index.
The exit comes as the International Monetary Fund, which conducted a review of Italy’s lenders this year, urged greater oversight of foundations’ governance of banks in a report this month.
Although foundations follow some general corporate governance principles, they face weak internal accountability and are heavily influenced by the interests of their membership, the IMF wrote in September. Intesa’s three largest shareholders are the foundations Compagnia di San Paolo, Fondazione Cariplo and Fondazione Cassa di Risparmio di Padova e Rovigo, which own a combined 19 percent.
Intesa will probably boost its domestic role and abandon plans to expand abroad, Luca Comi, an analyst at ICBPI, a Milan-based financial services company, wrote in a report to clients today.
Messina, who joined the bank in 1995 as planning manager at Banco Ambrosiano Veneto, was born in Rome in 1962 and holds an economics degree from Rome’s Luiss University. He was also formerly a professor at the Luiss School of Management.
“Messina is well known to investors with a long track record in the organization,” Alberto Cordara, a London-based analyst at Bank of America Merrill Lynch, said in an e-mailed report today. “Messina is very knowledgeable in terms of operations, all financial matters and has a deep understanding of the Intesa organization.”
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