Jean-Pierre Mustier to re-set purpose and direction at UniCredit

By:
Dominic O’Neill
Published on:

While the accelerated sales of stakes in Fineco and Pekao signal a new style, UniCredit's returning CEO says HVB still fits with the core Italian business

After months of turmoil at Italy’s biggest bank, Jean-Pierre Mustier’s return to UniCredit as CEO has raised hopes for what he says is a much-needed "sense of purpose and direction." His taking on the top job in Milan, less than two weeks after the board approved his nomination and less than two years after stepping down as head of corporate and investment banking at UniCredit, coincides with a deep crisis in the Italian banking sector.

Jean-Pierre Mustier 450x375
 Jean-Pierre Mustier,
 UniCredit
 
Losing more than 60% of its share price in the run-up to Mustier’s appointment, UniCredit is near the top of investor concerns about Italian banks. Research at KBW in June put its capital gap at around €7.5 billion. Those worries culminated in the board’s ousting of former CEO Federico Ghizzoni in late May.

Now investors are hoping Mustier can act on a mandate to shake up the group and shore up sentiment among clients, investors and employees.

"The environment for banks in general is not an easy one," Mustier tells Euromoney, discussing his priorities. "It’s absolutely vital for us to give a sense of purpose and direction to our clients and to our team."

Mustier says last month’s sale, through an accelerated bookbuild process, of 10% stakes in its Polish bank Pekao and Italian direct multichannel bank Fineco helped to "send a message to the market that we were willing to act quickly, but without rushing."

The stakes in Bank Pekao and Fineco raised €749 million and €328 million, respectively. They completed on the same day that Mustier officially began as CEO, July 12. Mustier says it was not a fire sale, but rather a chance to take advantage of a market window and do a transaction that was important both for the value it would create for the group and as a signal of intent.

On July 11 UniCredit issued a public statement announcing a strategic review of ways to boost the bank’s financial and operational performance, to be unveiled by the end of the year. Mustier has also undertaken a management rejig including the removal of CFO Bernardo Mingrone and COO Paolo Fiorentino, alongside the appointment of former head of corporate and investment banking Gianni Franco Papa to general manager, taking charge of the client push. Marina Natale, deputy general manager, is heading the strategy and M&A team during the strategic review.

"At a time when the top line can only grow at the pace of the European economies – which is not much – we’ll be challenging every activity to re-examine their cost base," says Mustier. He adds that the transferral last month of global head of markets TJ Lim to the position of group deputy chief risk officer heralds a "much more structured" approach to managing non-performing loans in the non-core portfolio (about €60 billion) and an acceleration of NPL work-outs and disposals.

After the review, which will also target ways to improve capital management across the group, Mustier says UniCredit will decide how to reach the necessary level of capital, potentially including a rights issue.

"We want to define who we are, and what our clients can expect from us," he says of the review. "When you clarify that, you change the dynamic of the interaction between the bank and its clients."

For the strategic review, Italy is explicitly demarcated as "absolutely core" to UniCredit. HVB (Germany’s third biggest private bank), UniCredit’s central and eastern Europe operation and its corporate and investment bank are also termed "strategic assets."

Despite criticism of stubbornly high costs in parts of its German operation, Mustier says a Mittelstand business fits naturally with a bank that is also strong in northern Italian manufacturing SMEs.

"Our DNA is in mid-market companies," says Mustier. "The return on capital in the Mittelstand is well above our cost of capital." Mittelstand clients also use the CEE network, he adds.

Markets reacted positively to Mustier’s first two weeks in the job, after months of uncertainty over the bank’s leadership. UniCredit’s share price rose almost 10% in the two weeks following his arrival, compared with a rise of around 1.5% at Intesa Sanpaolo, Italy’s second-biggest bank.

"He’s an outsider, but at the same time he knows the group; it’s a good choice," says Luigi Tramontana, banks analyst at Banca Akros. Another Milan-based analyst adds that Mustier is remembered for taking important steps to cut risk-weighted assets at the corporate and investment bank, after joining from Société Générale to run UniCredit’s CIB unit in 2011.

Analysts at Berenberg, however, remain sceptical about the change of CEO, reiterating their eagerness for UniCredit to consider selling HVB and its 50% stake in Koc Financial Services, 82% owner of Turkey’s fourth-biggest listed lender, Yapi Kredi. They suggest that UniCredit’s chairman, deputy chairman and two vice-chairmen – on the board for an average of just under 10 years each, while the group expanded – would probably oppose such radical moves by the new CEO.

The rapid and unexpected move to complete the Fineco and Pekao sales at the beginning of his term may buy valuable time for Mustier as he weighs up the group’s options, by demonstrating that the wait-and-hope approach at UniCredit is over.

"As we review our assets, we’ll be ready to take advantage of market opportunities whenever they come," affirms Mustier.