Italy's UniCredit names Mustier as new CEO

MILAN (Reuters) - UniCredit CRDI.MI appointed French investment banker Jean-Pierre Mustier as its chief executive on Thursday, a choice that is likely to lead to a multi-billion euro capital increase and asset sales to boost the bank's financial strength.

The headquarters of UniCredit bank is seen in Milan, Italy, in this February 8, 2016 file photo. REUTERS/Stefano Rellandini

The board of Italy’s biggest bank by assets unanimously backed Mustier at an extraordinary meeting, UniCredit said, ending the uncertainty that began last month when CEO Federico Ghizzoni said he would step down.

The appointment marks a big comeback for Mustier, 55, who was once fined in France for insider trading. He previously headed investment banking at Societe Generale SOGN.PA and at UniCredit and is currently a partner at fund manager Tikehau Capital.

He faces a difficult task at UniCredit. The bank’s shares have fallen more than 60 percent this year, weighed down by investor concerns over its profitability, high pile of bad loans and a weaker balance sheet compared to major European rivals. Ghizzoni agreed to go on May 24 in the face of shareholder discontent over the lender’s poor performance.

In comments distributed by the bank, Mustier - who will take on his new role on July 12 - said he will draft a new strategic plan to boost UniCredit’s capital and profits.

He plans to bring in a new team of Italian bankers to help overhaul UniCredit and raise its core capital ratio to 12.5 percent, from 10.5 percent now, a source familiar with his thinking said.

He is expected to launch a capital increase and would look to sell businesses such as local online bank Fineco, Polish unit Pekao PEO.WA and asset manager Pioneer, but not UniCredit's German bank HVB, the source said. A sale of its Turkish business would also not be a priority, the source said.

Mustier had first joined UniCredit to head its investment banking division in 2011, nearly two years after resigning from SocGen.

He was in charge of SocGen’s investment bank in January 2008 when the bank disclosed 4.9 billion euros (4.10 billion pounds) of losses blamed on rogue trades by Jerome Kerviel.

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Mustier left SocGen in 2009 after the French market watchdog accused him of insider trading. He was fined 100,000 euros for selling shares in the French bank just as world markets began to fall as the financial crisis intensified in the summer of 2007.

Mustier has always denied any wrongdoing.

UniCredit’s shareholders wanted a new boss with strong Italian connections but with an international perspective and experience managing complex operations at a big bank.

At least one Italian investor had initially opposed Mustier’s appointment and some shareholders would have preferred an Italian national, but those doubts were overcome during frantic overnight meetings leading to Thursday’s announcement, sources said. They said UniCredit’s chairman, Giuseppe Vita, was likely to be replaced after the summer.

Mustier has shown an ability to cut costs when he was investment banking chief at UniCredit and, as an investment banker, has skills required for a major fund-raising if needed.

One banker, who has known Mustier since he worked at SocGen, said he was highly intelligent and able to take risky decisions. “He is clever ... direct to the point, fully dedicated, he works 24/24 and never stops,” the banker said.

Senior government and central bank officials along with shareholders and bondholders had called for UniCredit to find a new CEO quickly given turmoil in financial markets.

Italy has taken longer than other European countries to stabilise its banks after a long recession that followed the 2007-2009 financial crisis. Its banks are still carrying 360 billion euros in bad debts, or a third of the euro zone’s total.

Rome is drafting a contingency plan to help banks in the wake of the Brexit vote, fearing a market sell-off may tip lenders into a full-blown crisis, officials have said.

UniCredit’s shares closed up 2.3 percent, reversing earlier losses as Italian banks gained on news that the European Commission has authorised a six-month Italian guarantee scheme to provide liquidity to solvent banks in case of need.

The Italian government may have to inject capital directly into weaker banks, a government source said, adding it was waiting for the results of stress tests being conducted by European banking authorities.

Additional reporting by Pamela Barbaglia and Maya Nikolaeva; Writing by Silvia Aloisi; Editing by Jane Merriman and Susan Fenton