Mustier Bids Adieu to UniCredit Lieutenants in a Video Call

UniCredit SpA Chief Executive Officer Jean-Pierre Mustier told his top managers not to fret when he spoke to them shortly before the disclosure of his abrupt resignation Monday night.

The 59-year-old architect of the Italian lender’s strategy for four years, his second tour of duty in Milan, cited Charles de Gaulle’s truism that graveyards are full of indispensable men.

Mustier Bids Adieu to UniCredit Lieutenants in a Video Call

“That’s life,” the former French paratrooper said, according to one of the people on the video call. “And this isn’t the first time I’m leaving because of disagreements within the bank.”

The end that capped months of tension between Mustier and his overseers came swiftly and suddenly: a little over 24 hours passed between an unscheduled board discussion on Sunday afternoon over governance issues and the final breakdown.

Padoan’s Arrival

Mustier’s isolation increased in recent weeks since the appointment of former Finance Minister Pier Carlo Padoan as UniCredit chairman. The French banker had resisted mounting pressure to take over the government’s perennial financial headache: Banca Monte Paschi di Siena SpA. The institution is currently owned by Italy’s Treasury under a European Union agreement to sell it by the end of next year.

UniCredit shares on Monday tumbled 8%, their steepest decline since Europe locked down in March. The drop signaled concern over the loss of a steady hand as CEO and the prospect that a merger with Monte Paschi was now just a matter of time.

“I’m still in UniCredit until the month of April, so it’s a little bit early,” Mustier told a Financial Times conference on Monday when asked about his next professional step.

Mediobanca analyst Andrea Filtri cut his recommendation to underperform, saying UniCredit has been a “safe ship” that was now exposed to high waves.

UniCredit’s board will never agree to any transaction that would harm the interests of the group and in particular, its capital position, a board spokesperson said late Tuesday.

The clash over Monte Paschi was the final straw for Mustier’s antagonists, who have sniped at his disposal of profitable or promising businesses. He has sold about 15 billion euros ($18 billion) of assets, including asset-manager Pioneer, online bank Fineco and Poland’s Bank Pekao. While the sales raised capital, they stoked concerns over growth.

Mustier’s Moves

There were some good times. Since taking the helm in 2016, Mustier stabilized the franchise by raising 13 billion euros of fresh funds from investors, cutting costs, including more than 22,000 jobs, and unloading more than 60 billion euros of bad loans.

In contrast, UniCredit’s crosstown rival in Milan, Intesa Sanpaolo SpA, has been an Italian consolidator. It purchased the troubled Banca Popolare di Vicenza SpA and Veneto Banca SpA for a single euro in 2017, along the way getting billions of euros from the state to maintain capital ratios and cover losses and legal risks.

Mustier Bids Adieu to UniCredit Lieutenants in a Video Call

Then it took over UBI Banca, leapfrogging UniCredit as Italy’s biggest bank by assets. UniCredit trades at about 0.31 times its tangible book value compared with 0.74 times at Intesa.

The valuation gap and Intesa Sanpaolo’s domestic growth underscored the pressures Mustier faced as Finance Minister Roberto Gualtieri pushed him over Monte Paschi.

The conflict intensified in the days leading up to Sunday’s meeting. Italy’s Treasury hired Bank of America Corp. as its adviser on Monte Paschi, highlighting its determination to complete a deal, according to people familiar with the matter.

Mustier Bids Adieu to UniCredit Lieutenants in a Video Call

Then it threw a package of sweeteners at UniCredit that addressed Mustier’s arguments against the purchase. These included a 2 billion-euro capital increase, protection from up to 10 billion euros of legal risks and 3 billion euros in possible tax credits.

Mustier has been in contact with the Treasury since July, making clear that any purchase of Monte Paschi should have been capital neutral for UniCredit, shielding the bank from legal risks, according to a person close to his thinking. He was open to a deal that would have created value for the bank, the person said, adding that the executive’s commitment to the bank led him to resist to pressures for transactions jeopardizing the bank’s capital.

The Treasury declined to comment.

While Mustier, who made his name as the investment-banking chief at Societe Generale SA, took charge at UniCredit with a mandate to repair the damage wrought by Italy’s perennial recessions, fixing Monte Paschi was going to be a whole other matter.

The Tuscan lender, the oldest in the world, reported a 451 million-euro net loss for the third quarter of this year and booked a 569 million-euro charge for legal risks and restructuring.

It was Padoan himself who dealt with a banking crisis that led to the nationalization of Monte Paschi in 2017 and his Oct. 13 appointment shifted the balance against Mustier.

It began coming to a head on Sunday. Word of an informal board meeting began circulating in the afternoon and the principals gathered on their video call at 6 p.m. without Mustier.

Several directors, who already started an informal search of a replacement, questioned Mustier’s strategy and choices and the meeting was adjourned to Monday evening, for a more formal assessment.

A formal extraordinary board meeting started Monday at 7 p.m. Within an hour when it became clear the breach was too great, Mustier decided to resign when his contract expires in April.

“Everything has accelerated, and with it Mustier’s departure,” said Vincenzo Longo, analyst at IG Markets in Milan. “The Monte Paschi deal has been the cause of his exit. Without him the doors to close the deal are wide open.”

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