UniCredit CEO departure puts focus on capital strategy

Bloomberg

UniCredit SpA’s decision to replace Chief Executive Officer Federico Ghizzoni after almost six years at the helm paves the way for a strategy review that may include a capital increase and asset sales, according to analysts.
Ghizzoni will depart once a successor has been chosen, the Milan-based bank said in a statement. Chairman Giuseppe Vita will lead the search for a new CEO.
“UniCredit’s next CEO needs to take drastic measures including a capital increase and asset sales as first step,” said Massimiliano Romano, head of research at Concentric Italy. Ghizzoni’s departure “was an expected step considering that management hasn’t been able to address capital and profitability issues.”
Ghizzoni’s revised strategic plan, unveiled in November, was seen by some investors as not ambitious enough to shake off the bank’s status as one of Europe’s most poorly capitalized lenders. He has repeatedly ruled out selling shares, instead focusing on improving profit and selling assets as well as lowering costs through job cuts. UniCredit rose as much as 1.6 percent in Milan trading and was up 0.7 percent at 3.08 euros. The stock has dropped about 38 percent this year compared with an 17 percent decline in the benchmark Stoxx Europe 600 Banks Price Index. The shares have lost about 75 percent of their value since Ghizzoni took the CEO job in September 2010.
The path ahead for UniCredit includes two options: “raising money or a mix of organic and inorganic measures to strengthen solvency,” Ignacio Cerezo, an analyst at UBS Group AG wrote in a note on Wednesday.
“More incisive action to tackle low returns of someactivities would be welcome” as well as a review of the investment-banking business.
Ghizzoni, 60, led UniCredit through the sovereign debt crisis, regulatory changes and Italy’s longest recession since World War II, struggling to bolster returns as mounting soured loans undermined earnings.
His resignation adds to an unprecedented wave of management changes at Europe’s biggest banks, battered by a squeeze to margins from negative interest rates and volatile markets. John Cryan replaced Deutsche Bank AG co-CEO Anshu Jain last year, while Credit Suisse Group AG appointed Tidjane Thiam to take over from Brady Dougan.

Banco Bilbao Vizcaya Argentaria SA and Barclays Plc also changed their top executives.
In Italy, banks have faced increasing regulatory scrutiny to tackle a 360 billion-euro ($401 billion) bad-loan pile as the economy struggled to emerge from a recession. The country’s lenders have been among the hardest hit by a selloff this year, compounded by investor concerns about their capital buffers and ability to boost profitability.