New UniCredit CEO sees need for stronger capital base

Frenchman Jean-Pierre Mustier, appointed Thursday as the new chief executive officer at Unicredit, said he would work to strengthen the troubled Italian bank's capital base and improve its bottom line.

UniCredit - which owns Germany's HypoVereinsbank - is Italy's biggest bank by assets and one of the largest in Europe. But the Milan-based lender has had a very rough 2016, losing more than 60 per cent of its stock market value in the last six months.

Mustier said in a statement he was "honoured" to take over as CEO at "a crucial time for the bank," promising "a new strategic plan with core objectives being to strengthen the group's capital ratios [and] to improve our bottom line."

The 55-year-old Mustier was a unanimous choice for the board of directors, UniCredit said. The bank looked for someone with "excellent understanding of international financial services" and "deep knowledge" of the institution, and Mustier "met all of the needed criteria."

Mustier is set to take up his position on July 12, filling the management void left by Federico Ghizzoni's resignation on May 24.

UniCredit shares on the Milan stock exchange jumped after the announcement, and after some fluctuations ended the day's trading up 2.3 per cent at 1.97 euros (2.18 dollars).

The new CEO is currently a partner at private investment fund Tikehau. He previously served as deputy general manager and head of corporate and investment banking at UniCredit from 2011-14 and has also worked at French lender Societe Generale.

Though all major Italian banks are burdened by bad loans, UniCredit's toxic debt load is the biggest, weighing its books down with about 80 billion euros (89 billion dollars) that is likely to never be repaid. Like its domestic competitors, the lender also suffers from high exposure to Italian government debt.

In addition, UniCredit took market flak for agreeing to underwrite the 1.5-billion-euro recapitalization of a smaller peer, Banca Popolare di Vicenza, stressing its already shaky finances. That burden was passed on to the Atlas bank rescue fund in April.

Analysts say UniCredit needs to raise fresh capital to strengthen its position and sell some of its foreign assets. At the end of the first quarter of 2016, its Tier 1 equity ratio - a key index of financial strength that compares the bank's holdings to its debts - lagged behind that of its main European peers at 10.85 per cent.

UniCredit has significant interests in Germany, Austria, Poland, Turkey, Russia, Ukraine and other central and eastern European countries.

The government of Prime Minister Matteo Renzi is considering a public support plan for the Italian banking sector, but European Union rules prohibit using taxpayers money to bailout lenders, save in exceptionally difficult circumstances.

Rome and Brussels are negotiating whether the market turbulence triggered by Britain's decision to leave the EU could qualify as one such circumstance.

Last update: Thu, 30/06/2016 - 23:50
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