What the change of boss at Unicredit means

Dhe end of the Mustier era at the second-largest Italian banking group Unicredit apparently came unexpectedly even for close employees. Media speculations about a possible replacement of the managing director Jean Pierre Mustier, who has been in office since 2016, were dismissed as a sign of the dissatisfaction of individual members of the board of directors during the course of the day. Perhaps one or the other felt left out when it came to choosing a new president for the bank.

But by the evening, an informal meeting of the board of directors revealed an open rift between the French bank chief and a majority of the 14 members of the board of directors – together with Mustier. Mustier announced that after his mandate expired in April 2021, he would no longer be available for an extension. To justify this, a scathing comment by the outgoing bank chief Mustier was officially distributed: “Over the past few months it has become clear that the current strategy ‘Team 23’ and its most important components no longer correspond to the current thinking of the Board of Directors.”

Mustier had rescued the bank, which was almost overwhelmed by bad loans, in 2017 with a rush-hack program. In 2015, before Mustier’s arrival, Unicredit had bad loans totaling 78 billion euros, a total of 16 percent of the loans. Mustier organized a capital increase by the record amount of 13 billion euros and the sale of fillet pieces for around 7 billion euros.

By 2019, the gross value of bad loans had been reduced to around a third. With his “Team 23” plan presented at the end of 2019, Mustier promised shareholders who believed in his plan during the capital increase that they would achieve a net profit of 5 billion euros and a payout ratio of 50 percent by 2023.

Scandals as an inheritance

The last dispute apparently arose over the demand of the Italian government that Unicredit should take over the crisis bank Monte dei Paschi from Siena. It was saved by the Italian state in 2017. The then Italian Treasury and Finance Minister Pier Carlo Padoan had to promise the competition watchdog of the EU Commission that the bank would be privatized again by 2021. But so far there has been no potential takeover anywhere.

Italy’s largest bank, Intesa Sanpaolo, avoided any political pressure for a takeover by taking over the much more successful medium-sized bank Ubi instead of Monte dei Paschi, thereby reaching the limit of a dominant position with its market share in Italy. Therefore, expectations are now directed towards Unicredit. Of all people, the former Minister of the Treasury Padoan was finally accepted into the Board of Directors and predestined to be the future Unicredit President.

Padoan also entered parliament for the first time as an independent candidate in the Siena constituency for the center-left democratic party. Their predecessors, the left-wing democrats and communists, had previously held power in Siena for decades in the town hall of Siena and, at the same time, indirectly had control over Monte dei Paschi. The legacy of political influence on the bank was ultimately scandals and between 2011 and 2017 net losses totaling 21 billion euros.