Does the quest to find a replacement for Federico Ghizzoni as chief executive of embattled UniCredit have just a touch of the ‘who’d want that job’ fatalism around it?
Whoever does take over will have their work cut out. Shareholders are revolting and the share price has fallen 38% this year, as of last night’s close. Between their 2007 pre-financial crisis high and their 2012 nadir, shares had lost over 95% of their value and aren’t appreciably off that low today, trading way below book value.
To make any appreciable headway, the new boss will have to trim UniCredit’s sprawling geographic footprint that’s spread all over Central and Eastern Europe and Central Asia (probably by selling its stakes in Poland’s second-largest lender Bank Pekao and in Yapi Kredi, Turkey’s fourth largest bank).
He or she will have to engage in a round of asset sales (including online broker Fineco); restructure senior management ranks to inject a new lease of life and a new sense of purpose; potentially retune the current restructuring plan (that is … restructure the restructured restructuring plan) that involves cutting thousands of jobs as well as ditching risk-weighted assets.
And figure out what on earth to do with the €80bn non-performing loan mountain, the biggest in Europe.
And win back some of the ground and kudos lost to better-performing rival Intesa Sanpaolo.
And grasp the nettle of a rights issue that, depending on the success of some of the things above, might need to be in the realm of €9bn-€10bn.
Or potentially lead UniCredit into a merger. With whom, who knows?
Ghizzoni has steadfastly refused to increase capital. Partly as a result of that, the group’s AT1 bonds have been among the worst performers of any European national champion. The 6.75% euro perp non-call 2021s are bid a tad above 85 for a yield 7.36%, while the dollar perp non-call 2024s were showing yields around 8.65%.
The embarrassment of having just 7.66% subscribed for Banca Popolare di Vicenza’s €1.5bn hard-underwritten IPO and the deal having had to be bailed out by Atlante will pass but such poor issues of judgement hardly instil confidence.
On a side note, what on earth were joint bookrunners on the Vicenza deal – BNP Paribas, Deutsche Bank, JP Morgan and Mediobanca, which had teamed up with UniCredit – thinking? Such breath-taking ineptitude on a transaction that always looked to be a stretch is hard to explain away; I know UniCredit was sole guarantor on the deal and I know IPOs have been a bust so far this year, but association with the biggest dog for years is pretty embarrassing in itself.
In the frame
Chatter has it that UniCredit board member Lucrezia Reichlin, London Business School professor since 2008 and director general of research at the ECB for three years prior to that, is first in line to take over from 81-year old chairman Giuseppe Vita.
As for the CEO, it’s close to inconceivable that any of Ghizzoni’s lieutenants are in the frame, given their complicity in the bank’s underperformance.
Those tipped for the role include Jean-Pierre Mustier, Alberto Nagel, Marco Morelli, Flavio Valeri, Giampiero Maioli, Gaetano Micciche, Andrea Orcel and Sergio Ermotti. I don’t know all of them but it’s certainly a formidable if pretty safe bunch of candidates.
Mustier was head of CIB at UniCredit and was previously chief of Societe Generale CIB, having spent 22 years at the French bank. He upped sticks for hedge fund Tikehau in January 2015 but maintains links to UniCredit as a member of the group’s international advisory board; UniCredit also has a stake in Tikehau.
Nagel heads up Italian investment bank Mediobanca, in which UniCredit has an 8.59% stake. He’s spent his entire career at Mediobanca, which has deep roots in the fabric of Italian business, corporate and political life.
Morelli is EMEA vice chairman at Bank of America Merrill Lynch and Italy CEO. Prior to joining the US bank, he was general manager and deputy to the CEO of Intesa Sanpaolo; deputy GM of Banca MPS; and has worked at JP Morgan, UBS and others.
Giampiero Maioli is head of Credit Agricole in Italy, including local unit Cariparma Credit Agricole. He’s been at the group since 1992, and at Credit Agricole since 2007 when the French bank acquired Cariparma during Intesa’s merger with Sanpaolo IMI.
Flavio Valeri is Deutsche Bank’s country chief for Italy and chairman and CEO of Deutsche Bank’s Italian unit. A veteran investment banker and ECM specialist, he’s been at DB since 2008. Before joining Deutsche, he spent seven years at Merrill and did a previous seven-year stint at Deutsche in London and Frankfurt. Gaetano Micciche is chairman of Banca IMI, the investment banking unit of Intesa Sanpaolo.
The six million dollar question is whether getting the keys to the corner office of the funky UniCredit tower in Milan is a sufficient prize. I wonder. Actually, bearing in mind what Ghizzoni gets paid, it won’t be anything like a six million dollar answer. The new incumbent certainly won’t get paid the kind of danger money you’d think the role requires. This will become an issue as the headhunters go down the list of candidates.
At the very least, we won’t have to wait long, since whoever is selected is expected to be unveiled as early as the next board meeting on June 9. And as is the way these things turn out, it’ll probably be someone not on my eminent list.
Can’t wait.
