A Long-Awaited Resignation

Federico Ghizzoni, chief executive officer of UniCredit SpA, listens during a news conference announcing the bank's first-quarter results in Milan, Italy, on Tuesday, May 10, 2016. UniCredit, Italy's largest bank, reported first-quarter profit that beat estimates after provisions for bad loans were lower than expected. Photographer: Alessia Pierdomenico/Bloomberg *** Local Caption *** Federico Ghizzoni
Federico Ghizzoni, Unicredit man on the way out.
  • Why it matters

    Why it matters

    After months of speculation, Federico Ghizzoni was sacked as CEO of Unicredit. The Italian bank’s poor capital ratio may lead to asset sales, including its stake in Germany’s Hypo-Vereinsbank.

  • Facts


    • Both Unicredit CEO Federico Ghizzoni and Chairman Giuseppe Vita are likely to lose their positions in the very near future.
    • The bank’s share price has fallen by over a half in the last year, and its capital ratio is seen as dangerously thin.
    • The new chief executive will need to raise capital, and asset sales can not be ruled out. This could include floating a stake in the Bavarian bank Hypo-Vereinsbank, bought by Unicredit in 2008.
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Federico Ghizzoni, as always, was a busy man on Monday. He had an appointment at the Madrid Stock Exchange, then the opening of the new headquarters of Unicredit Spain, then a meeting with King Felipe of Spain.

But while the Unicredit chief executive worked through this schedule, a constant stream of rumors came out of Italy. In short: Mr. Ghizzoni was about to be fired.

Eventually, despite being 1,200 kilometers from Unicredit’s Milan headquarters, the rumors caught up with Mr. Ghizzoni. Forced to make a statement, Mr. Ghizzoni dismissed the rumors with a grandly sovereign touch.

“Nothing dramatic is taking place in the group, the situation is absolutely under control, there are no tensions whatsoever,” he claimed.

And, he added, there is no reason whatever for his bank to raise new capital. In recent months, this last point has become his mantra.

It is fair to say his statement was greeted with skepticism. No tensions? No new capital? In Italian financial circles, it was already clear that the country’s largest bank would hand in his resignation – or have it handed to him – on Tuesday.

An extraordinary meeting of the supervisory board took place Tuesday afternoon. By the late evening, Mr. Ghizzoni had agreed to resign. He will remain chief executive only until his successor is in place. That could be as soon as the next supervisory board meeting June 9.

For more than a year, shareholders have watched as the stock price has plunged in value. The bank’s shares have been among the hardest hit this year in Europe, suffering from similar ails to rivals Deutsche Bank and Credit Suisse, both of which replaced their own chief executives in the past year.

Events in Milan will also be watched with particularly keen interest in Munich, at the headquarters of Hypo-Vereinsbank, one of Germany’s largest banks, which was swallowed up by Unicredit in the fall of 2008.

Here, the rumor mill is running at full tilt. The speculation is that if the new Unicredit boss wants to raise cash, they may also look to re-list the Bavarian bank.

“The bank needs such radical changes that they can only come about via discontinuity.”

Leonardo Del Vecchio, major stakeholder, Unicredit

Mr. Ghizzoni, a quiet-spoken northern Italian, has been with the bank for 30 years, and chief executive for the last five. Unlike counterparts at Credit Suisse and Deutsche Bank, who were ousted last year, Mr. Ghizzoni had held on until now.

But his position has been under threat for months.

A new strategic plan, presented in November, did little to assuage concerns, despite taking the drastic step of moving the bank’s Eastern European holding company from Vienna to Milan, cutting 14 percent of the bank’s personnel and virtually closing its Austrian operations.

Since the beginning of the year, dissenting voices have become deafening. The revolt culminated last week when a powerful group of investors issued a demand to the Unicredit chairman, Giuseppe Vita, to find a new chief executive. They also raised questions about his own position.

The rebellious shareholders wanted to send a message to the markets – and the markets responded. By the end of the week, Unicredit’s share price had leaped up 7.5 percent, a ray of hope after a 55-percent fall in the previous twelve months.

The spokesman for the shareholder revolt is the legendary Leonardo Del Vecchio, founder and chairman of the Luxottica eyewear group, and a major stakeholder in the bank.

“Maybe today the bank needs such radical changes that they can only come about via discontinuity,” he said back in February. He has not changed his mind in the meantime.

The reasons for the shareholders’ discontent are not short-term. Unicredit’s most recent quarterly results were not bad. Net profits sank 20 percent in the first quarter, but that beat market expectations, which had been lowered by the ongoing crisis in the Italian banking sector.

Unicredit’s problems run deeper: “The strategic plan was inadequate,” said one analyst, who declined to be named, “and the necessary capital can only be raised if there’s a credible CEO. Ghizzoni has completely lost the confidence of major shareholders.”

He is not alone in his assessment. “We believe that a possible change of CEO can accelerate the capital raising process. Right now, core capital has only a limited buffer,” was the verdict in a research not by experts at the Banca Imi.

“Nothing dramatic is taking place in the group, the situation is under control, there are no tensions whatsoever.”

Federico Ghizzoni, Unicredit CEO

In spite of Mr. Ghizzoni’s many assurances to the contrary, the bank is in urgent need of capital. Analysts speak of a figure between €5 billion and €7 billion ($5.6–7.85 billion), needed to bring the bank’s core capital ratio up to 12.5 percent by 2018. Hitting that figure is a new requirement of the European Central Bank, the euro-zone’s top banking regulator, and therefore unavoidable.

The figure is currently seen as dangerously low, at 11 percent. An alternative to raising new capital would be a possible sale of assets: Unicredit is pondering the sale of Fineco Bank, its online broker, and possibly its stakes in the Polish bank Pekao and Yapi Kredi in Turkey.

And then there’s the speculation surrounding Hypo-Vereinsbank. The Italian company has always strongly denied any intention to re-list its German subsidiary, but that has never stopped the chatter. The question has been raised so repeatedly that Theodor Weimar, head of Hypo-Vereinsbank, has banned any further inquiries on the theme.

067 HVB (HypoVereinsbank Group) - Neu 2015-07.16-01

Recent events in Milan have further fed speculation. “It’s quite possible that part of Hypo-Vereinsbank will be brought to market,” said Philipp Hässler, a Frankfurt-based bank analyst with Equinet. “I would rule out a complete sale, but it is quite possible that a 15 to 20 percent stake could be put on the market,” he added.

That would hardly be a problem for Hypo-Vereinsbank, Mr. Hässler suggested: “It would be an attractive investment: It has good results, is very well capitalized, and it modernized its branch structure early enough.”

Within the bank’s leadership, the attitude is relaxed towards events in Milan. They are not afraid of going to the market. On the contrary: Mr. Weimer is regarded as an ambitious manager who, after years of being under Milan’s thumb, would gladly gain more independence and influence.

Meanwhile, assuming Mr. Ghizzoni is discarded as expected, speculation is rife over his replacement, as well as Mr. Vita, the other half of Unicredit’s affable leadership double act.

For the chief executive position, four names are doing the rounds: Marco Morelli, vice-president for Europe and the Middle East at Bank of America-Merrill Lynch; Flavio Valeri, head of Deutsche Bank Italy; Jean-Pierre Mustier, a senior figure with French private debt specialists Tikehau; and Alberto Nagel, chief executive of Mediobanca.

To replace Mr. Vita, the economist Lucrezia Reichlin, already a non-executive director with the bank, is seen as a plausible candidate.


Regina Krieger is Handelsblatt’s Italy correspondent. Kerstin Leitel covers banks and insurance companies for Handelsblatt in Munich. To contact the authors: leitel@handelsblatt.comkrieger@handelsblatt.com.

This story was updated with news of Ghizzoni’s resignation on Wednesday at 10:00 CET.

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