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“New” UniCredit is nearly three quarters controlled by funds

by Marco Ferrando

The ”new” Unicredit bank , after a record €13 billion capital increase, is now almost three quarters in the hands of the market, its shareholders meeting yesterday showed, ending the long reign of non-profit banking foundations.

A total of 62% is owned by institutional investors, almost all foreign, and another 10% is owned by sovereign funds.

As was foreseeable, the avalanche of new paper has modified the structure of ownership: the banking foundations, which were previously the undisputed masters of the bank, today have 6% of the capital, while 13% has remained for retail investors, that is small savers, less than half of the 28.8% they had at the end of November.

The bank was already a public company -- one of Italy’s few -- and now today it is even more so. And since it’s true that the loyalty of market players is the most difficult to win, it is significant 57% of capital was represented at yesterday’s meeting, more than the 46% recorded last year when the spectrum of shareholders was narrower.

This was a success for new Chief Executive Jean Pierre Mustier, who was able to win the support of investment funds. And it was a confirmation of the unavoidable marginalization of small shareholders, traditional protagonists of the shareholders' meeting, who yesterday did not fail to underline their displeasure over seeing that the bank that is no longer in their hands.

After the initial grumbling when voting began, there was nothing more to say: the accounts of the “old” UniCredit, that is €11.4 billion of losses in 2016 due to the heavy write downs on loans and stakes, passed with 99.9%, while the remuneration plan was also approved with a wide margin.

Mustier and the top managers have cut their salaries by 40% - with relative incentives. As already happened last week at Eni, a few funds said no; banking foundations Fondazione CrTorino and CrTrieste abstained, and the director-general of CariVerona Giacomo Marino did not vote because he had already left the room.

UniCredit shares rose a further 1.8% yesterday. Now that the markets are playing an even bigger role, the situation makes it essential to look ahead. The bank plans a further disposal of NPLs (after a “significant reduction in deteriorated credit thanks to decisive actions to reduce risk, reaching the lowest level since mid-2010, Mustier underlined), the strengthening of capital (“We are ahead on the new Basel 3 rules”) and more in general the implementation of the Transform 2019 plan, which after the forced diet of 2016, already forecasts a return to a dividend on 2017 results, equal to 20% of profits net of extraordinary items.

In the future looms the governance issue.

The last year of the board's term started yesterday, in 2018 it will have to be renewed according to rules and numbers that take greater account of the new shape of the public company.

This is a subject that will be dealt with by the board and the work on governance was outlined by Chairman Giuseppe Vita on Tuesday in his interview with Il Sole 24 Ore, but it is also particularly dear to CEO Mustier. Among the many options on the table, Mustier would not frown upon a single list of candidates for the new board, capable of uniting the sensibilities and demands of actors that used to be the majority and the minority shareholders, but that have been mixed up in the new structure.

Some new things have already been identified: the reduction of the board from 17 to 15 members and the vice chairmen from three to one. For the board, we will have to wait until 2018, for the other point we will not: after Fabrizio Palenzona, yesterday also Luca Cordero di Montezemolo stepped down as vice chairman, as Il Sole had revealed in advance.

Montezemolo is in Abu Dhabi right now working with Etihad on the Alitalia rescue, but in his letter to Chairman Vita, he explained that it involved a decision “in line with what was decided” by the work on governance carried out by the Corporate Governance committee, which he chairs.

“Among the recommendations that the committee, and I personally, are promoting, there is the one of major simplification in the composition of the board, which is achieved through the reduction in the number of vice chairmen from three to one,” he wrote in a letter reported by news agency ANSA.