Anybody Got A Pro-Forma for a Post-Profumo UniCredit?

Ashby Monk

Yeah, the subject line above is a pretty weak attempt at humor. But, in all seriousness, Alessandro Profumo’s resignation will undoubtedly impact UniCredit’s international expansion efforts, with knock on effects for the bank’s bottom line. While some have called him “Mr. Arrogance”, Profumo was also “The Architect” behind UniCredit’s dramatic rise over the past few years. The bank from Northern Italy went from a regional bank to become Italy’s largest under Profumo’s tutelage, as he took advantage of the opening of the Euro market to make $65 billion in strategic purchases and acquisitions over his 13 year reign.

Now, much of the news surrounding Profumo’s and UniCredit’s woes in the past few weeks has been focused on the increasingly large stake owned by the Libyans. And, to be sure, the Libyan’s have played a role in Profumo’s downfall. After all, Libya’s central bank now owns 4.98% and the Libyan Investment Authority holds 2.59%. But it’s hard to blame the Libyan’s for all of this (even though they do have a strategic interest in Italian banking, which could legitimately raise some concerns among Italian policymakers). Instead, it seems UniCredit’s problems are domestic.

Profumo’s apparent mistake was in trying to free himself from the grip of local politicians (and their foundations) in order to focus on the commercial interests of the bank globally. This did not play well back in Northern Italy. For example, Verona’s Mayor Flavio Tosi has argued that UniCredit should ‘pay less attention to fostering international ties and more to its home market’.

Ultimately, Profumo’s “resignation” (~firing~) was based on the dilution of these local shareholders, which was a necessity to keep the bank going during the financial crisis. Here’s Bloomberg’s take:

“Takeovers left him short of funds when confidence in banks collapsed in 2008 and credit became scarce, forcing the CEO to turn to investors for cash twice in 18 months.”

And here’s an interesting tidbit from The Guardian:

“Celent analyst Enrico Camerinelli said the clash with Rampl was not over Profumo’s ability to run the company but over political control of a major banking institution. “It has a lot to do with the political situation in Italy. The Northern League wants to have control over northern Italian banks.”

And this is why a pro forma for a post Profumo Unicredit would be interesting to see. The loss of ‘Mr. Arrogance’ will be serious for UniCredit’s future operations. And I don’t say that because I’m a huge fan of Mr Profumo (I’m indifferent); I say that because his firing implies that UniCredit could return to its local roots and focus on its social and political obligations in Northern Italy.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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