Wednesday , August 4 2021

What happens to Unicredit

On Monday, November 30, the CEO of Unicredit Banking Group, Jean-Pierre Moustier, announced his decision to step down at the end of his current term, which expires in April 2021. Moustier, a 59-year-old Frenchman with a parachute in army and 33 years of banking career behind him, most of which he spent at the Paris Bank Societe Generale, he headed Unicredit from the summer of 2016.

Mustier attributed the decision to step down to a different opinion that has emerged in recent months with the Unicredit Board, saying the four-year strategy he proposed a year ago, nicknamed Piano Team 23, is no longer in line with the current vision of Board of Directors.

Plan Team 23 had several goals: it aimed to increase the number of Unicredit customers in Europe and increase the bank’s productivity by transforming into paperless bank (ie by digitizing its processes). It also aimed to save 1 billion euros by cutting 8,000 jobs and closing 500 branches, as well as reducing the bank’s non-performing loans, increasing its assets and paying its shareholders, as well as by distributing a dividend of 6 billions. euros and with the purchase of own shares for 2 billion euros (so-called buy back: further way of distributing wealth to shareholders).

Mustier wanted to create one undergrounding in which the group’s foreign activities will be channeled to optimize structure and costs. However, the project was lagging behind because the CEO himself felt it was no longer needed, given the more favorable monetary policy conditions in the recent period.

Finally, the plan ruled out mergers and acquisitions of other Italian banks, leaving the door open only for small companies offering complementary services to those of the bank in Central and Eastern Europe.

In the first days after its publication, some newspapers speculated that this was the reason for the clash between Mustier and the Board of Directors, which in October elected Pierre Carlo Padoan, former Minister of Economy, among its members, pointing to him as the next president starting in 2021. reconstructions announced Monday Bloomberg and reported by other newspapers, Moustier reportedly received pressure from the Economy Ministry to buy Monte dei Paski di Siena, the bank saved in 2017 by the Italian government: at that time the government bought 68 percent of the bank for 5.4 billion euros. but by the end of 2021 it will have to leave the shareholder base under agreements with the European Commission.

Second Bloomberg, Padoan, who led the rescue of Monte dei Paski when he was minister, would have been selected and nominated by the Unicredit Board precisely to pave the way for the acquisition of Monte dei Paski, made meanwhile more attractive to the government with three measures to be taken. be included in the following budget law: a promise to pay an additional 2 billion euros, protection against legal risks up to 10 billion euros and the possibility of obtaining tax credits up to 3 billion euros for the buyer.

Reconstruction of Bloomberg this would imply that the Unicredit Board is strongly influenced by the Italian government. This is an unproven hypothesis, but in any case compatible with the fact that the bank, whose capital is fully listed on the stock exchange, does not have a majority shareholder as it allows control: on June 8, the last date for which the shareholder structure was available, the largest shareholder was the American investment firm Black Rock, which had only 5.07 percent. Unicredit is what in slang is called a public company, a company owned by many small shareholders, in which decision-making power is exercised by executives led by the CEO.

In this regard, said economist Alessandro Penati Tomorrow last Friday as a merger with Monte dei Paski di Siena, conducted with a stock exchange at current stock prices, would lead the country to become one of Unicredit’s largest shareholders, opening the door to a de facto government-controlled company.

Two days after the news of Mustier’s resignation, many shareholders sold their stake in Unicredit, leading to a loss of 2.5 billion euros in capitalization. The decision to sell may have been conditioned by the possibility that Italian policy influenced the decisions of the management and the uncertainty about the future strategy that the bank will adopt. The decline then stopped thanks to a statement issued by the board on December 1, which said: The board “will never accept any transaction that could harm the interests of the group and especially its capital position”, that is one thing. which should be taken for granted, but it is not, in case they doubt the political motives behind the company’s decisions. The communiqué also adds that the Board will continue to distribute capital to shareholders (when it can, as the ECB has asked European banks not to reimburse their shares until January 2021 due to the crisis).

Shares did not change much after the announcement and closed the trading session of 8.13 euros on Friday night, recording a total decline of 10.56 percent in the last week.

Reconstruction of Bloomberg, however, this was rejected by Padoan. On Thursday, Padoan told al Financial Times that the Monte dei Paski di Siena affair was not a source of disagreement with Mustier and added that his appointment to Unicredit was not political and had nothing to do with Monte dei Paski. Padoan repeated his side of the story in an interview with Courier service published today and confirmed by Mustier himself who, as reported by Printing, said politics has nothing to do with it.

As proof of the fact that the difference was not on Monte dei Paski, last week on Financial Times wrote that Moustier and the Board agreed that Unicredit could buy MPS in deviation from Moustier’s strategy, provided the transaction had no effect on the group’s capital (for this purpose the measures introduced would have been used by the government in the draft budget law) .

Another version that has appeared in the newspapers in recent days is that the disagreement was about the creation of undergrounding in which the foreign assets of the group will be placed. However, this hypothesis seems unlikely because, as we have said, the project itself was stuck by Mustier himself.

According to what Padoan al Courier service, the rupture instead seems to be the result of a divergence “of the steps to be taken for the integration strategy outside Italy”: “The strategies we agree on are not in question. “Different visions have emerged after the modalities.” What these modalities are is still unclear.

In recent years, with the four-year strategy 2016-2019 (Transformation Plan 2019), Mustier has focused on reducing the risk of the bank’s assets through the sale of non-performing loans and its recapitalization, by increasing capital by 13 billion euros, and through sale of profitable business units such as Fineko Bank, asset management company Pioneer, Polish bank Pekao and 8.4% of the shares of Mediobank. In short, he sold everything he did not consider irreplaceable in order to raise money and compensate shareholders.

This strategy was the subject of debate because, as noted on 3 December, Taba 24 ores, although the money raised from the capital increase and the sale of subsidiaries totaled about 23 billion euros, the stock market capitalization of Unicredit in the Mustier era increased by only 8.5 billion: so much of the value of these shareholder transactions was lost.

Furthermore, many pointed out that the strategy implemented by Mustier meant that Unicredit was dethroned by Italy’s biggest competitor, Intesa SanPaolo, which this summer became the largest Italian banking group in terms of assets acquired by UBI Bank. . The strategy followed by Intesa in recent years is the opposite of that of Unicredit: Intesa aimed to grow nationally through a series of acquisitions, more than a dozen since 2016.

According to Padoan, it is clear that something will change in the choice of Unicredit integration, but the specific plans of the Board of Directors for the future of the bank, which have been so much speculated in recent days, are less clear. This uncertainty, dangerous for the shares, will stop only with the appointment of a new CEO and the presentation of a new business plan. On the first point, the Board of Directors began to replace Mustier before the expiration of his contract and may end with a shortlist of candidates for the Ordinary Council scheduled for next week. As for the new plan, the proposal will be presented to the Board on December 17.

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