Discontent over CEO grows among Mediobanca investors-sources
MILAN, Sept 21
MILAN, Sept 21 (Reuters) - Growing signs of discontent over CEO Alberto Nagel are emerging among Mediobanca investors, although this has not yet reached a level that would force the removal of Italy's most powerful banker, sources with knowledge of the situation said.
Mediobanca's board on Thursday began work on a new strategic plan for the bank at a meeting that also approved results showing an 80 percent decline in annual profit.
The bank, a kingmaker in practically every financial deal in Italy thanks to a web of cross shareholdings, is suffering under the weight of the euro zone crisis and being forced to rethink an outdated business model.
While board member Tarak Ben Ammar went on the record on Thursday to say the board remains united at Nagel's side, insiders say concerns about him have been growing since he was put under investigation in July for allegedly obstructing the work of Italy's financial regulator.
"There is a feeling that Nagel must be replaced sooner or later. But it will not happen right now. They will kick him out later," said one source close to the board.
"The atmosphere among shareholders is this one (discontent), but nothing will happen in the short term. Much will depend on the judicial developments," said a second source familiar with the situation.
Nagel declined to comment.
Nagel, at the helm of Mediobanca since 2007, is the force behind a bold merger of loss-making Fondiaria-SAI, Italy's No.2 insurer, with its smaller peer Unipol, a move that helped protect the bank's 1.1 billion euro exposure to Fondiaria.
Despite saving his bank from a large loan default, Nagel is in a weak position after he acknowledged initialling a secret document containing a list of requests by Fondiaria's owners, the Ligresti family, in exchange for their exit from the group.
The alleged pact would have contravened demands by market regulator Consob not to give any financial benefits to the Ligrestis as part of the Fondiaria-SAI deal.
Even though the alleged accord came to nothing, some shareholders believe Nagel made a serious mistake by signing it. He denies any wrongdoing and says he only signed off on the document to show that he had seen it.
Shrinking profits at the bank, partly due to massive writedowns on sovereign debt holdings and financial investments, are not helping Nagel.
"It's not surprising that some shareholders are unhappy. The fact that he is under investigation is not nice and financial results are bad," said a third source close to the situation.
A source close to the bank said, however, that Nagel enjoyed the support of Mediobanca's largest investor, UniCredit , and of key French shareholders, accounting for 20 percent of the bank between them -- enough to keep Nagel firmly at the helm of Mediobanca.
Two sources who followed the board meeting said no criticism was raised on Thursday. "Mediobanca has done very good work over the past years. Its business model is working," a board member said at the meeting.
MODEL FROM THE PAST
Mediobanca, created at the end of World War Two by Sicilian banker Enrico Cuccia, has been instrumental in helping fledgling Italian companies grow in post-war Italy.
The bank's role meant it ended up at the centre of a web of cross-shareholdings that gave it a dominant position in Italy's financial world.
But some shareholders say this model belongs to the past and the investment bank should look for better ways to profit from its advisory role in key Italian transactions.
Two sources close to the situation said they expected Mediobanca to slash its 13 percent holding in Italy's biggest insurer, Generali, something the bank has long resisted but will have to do because of imminent capital rules.
"This is what is planned, but not in the short term. If Generali makes a capital increase, this would be the opportunity for Mediobanca to dilute itself," one of the sources said.
Mario Greco, who has Nagel's backing and started on Aug. 1 as the Chief Executive of Generali, is working on the insurer's strategy.
One board member said any decision with regards to Mediobanca's future would be dependent on the Generali strategy, a more stringent regime under Basel III rules on capital requirements, and the whole macroeconomic scenario.
Several board members said the board had decided to shelve suggestions to split Mediobanca's operations from its financial holdings, something that analysts say would depress the bank's capital base, currently at a healthy 11 percent, to levels well below those deemed acceptable by European regulators.
(Additional reporting by Silvia Aloisi and Gianluca Semeraro; Editing by Giles Elgood)
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