UniCredit Investors Said to Seek CEO Ouster Amid Capital Needby and
Ghizzoni wants to focus on raising profit, selling assets
UniCredit’s CET1 ratio fell to 10.5% at the end of March
UniCredit SpA investors are considering demanding the ouster of Chief Executive Officer Federico Ghizzoni, said people with knowledge of the deliberations, in a reshuffle allowing Italy’s largest lender to tap investors.
Shareholders met on Monday to discuss possible management changes, giving a mandate to Chairman Giuseppe Vita to draft a plan over the next months, the people said, asking not to be identified because the matter is private. A spokesman for UniCredit in Milan declined to comment.
Ghizzoni, 60, is eliminating thousands of jobs as regulators step up pressure on the country’s lenders to tackle 360 billion euros ($406 billion) in soured loans and raise capital ratios. While the CEO has repeatedly ruled out selling stock and reiterated last week that he plans to raise buffers by increasing profit and through asset sales, UniCredit remains among Europe’s least capitalized banks.
“The possible change in governance could speed up the process toward a rights issue, intended at strengthening the capital base that currently offers a limited buffer” to meet regulatory requirements, Manuela Meroni, an analyst at Banca IMI with a hold recommendation on the shares, wrote in a note Wednesday.
Lucrezia Reichlin, a member of the UniCredit board and the European Central Bank’s former head of research, could be named chairman, while Marco Morelli, former chief financial officer of Banca Monte dei Paschi di Siena SpA, may be considered to replace Ghizzoni, according to Italian media reports.
UniCredit’s common equity Tier 1 ratio, a measure of financial strength, fell to 10.5 percent at the end of March from 10.7 percent three months previously. It may slip a further 0.2 percentage points if its 1 billion-euro stake in Atlante, Italy’s government-orchestrated bank-rescue fund, is fully invested, Ghizzoni said last week. The bank has the smallest capital margin among Italy’s largest lenders, with the ECB requesting a 10 percent ratio for 2016.
To help shore up capital levels, UniCredit will repurchase up to 700 million euros of additional Tier 1 and Tier 2 bonds maturing from 2018 to 2021, according to a statement on Tuesday. The lender repurchased 1 billion euros of notes from retail investors in February.
The bank has declined about 44 percent this year, making it the second-worst performer on the 39-member Bloomberg Europe Banks and Financial Services Index, which has dropped 23 percent. Ghizzoni took over as CEO in 2010.
“Rumors on Ghizzoni’s exit have been circulating for some time now,” Luca Comi, an analyst at ICBPI in Milan, wrote Wednesday. “These rumors reopen debates and hypotheses on a possible capital increase, always ruled out by the current CEO.”
Pressure on senior management increased after the bank’s decision to be the sole underwriter of Banca Popolare di Vicenza SpA 1.8 billion-euro share sale. With investors balking at the initial public offering, Atlante stepped in to buy the stock.
“The capital shortfall of UniCredit is well-known and it has become more evident following the setup of Atlante where UniCredit ‘invested’ up to 800 million euros,” undermining its capital buffer, Fabrizio Bernardi an analyst at Fidentiis Equities wrote in a note Wednesday. “In case the shareholders of UniCredit decide for a managerial reshuffle, we believe it should be wide and involve most of the management of UniCredit.”