Italian Banking Is Hard Work for a Frenchman

(Bloomberg Opinion) -- In Europe’s embattled banking industry, few chief executive officers can claim to have made as meaningful a mark on their business as Jean Pierre Mustier at UniCredit SpA. Unfortunately for him, running a national banking champion — especially during a pandemic, and especially in Italy — also requires a high degree of political savvy.

That Mustier’s future at UniCredit is coming to an abrupt end doesn’t say much about his plans for the lender, nor his abilities; it is more about the role an increasingly interventionist Italy would like its banks to play.

In his four years running the bank, the French CEO has dramatically reduced a mountain of bad debt, improved efficiency and sold non-core assets. Just before the pandemic hit, UniCredit was in good enough health to plan a significant boost to shareholder payouts, finally reaping the rewards of his turnaround.

True, Mustier got rid of higher-growing businesses and burned through a massive capital raise. And the shares were still languishing, trailing behind its bigger Italian peer, Intesa Sanpaolo SpA. But his decisiveness and ability to deliver on financial targets had even attracted the attention of HSBC Holdings Plc, which considered Mustier as CEO. Surely the Italian lender should be bending over backward to keep him.

And yet, as Mustier tries to revive the bank’s profitability after the shock of the pandemic, he finds that Italy’s Treasury and other parts of the government are the stakeholders he needs to please, not ordinary shareholders. Italy is eager for UniCredit to become a white knight for ailing Banca Monte dei Paschi di Siena SpA, and Mustier — naturally enough — isn’t so keen. That has cost him his job. The CEO on Monday informed the bank he will leave in April citing a clash of opinion with the board on the firm's strategy.

Taking over Monte Paschi is a distraction UniCredit could do without, even if it comes with a large state subsidy to cover the costs and any capital shortfall. The combination wouldn’t give UniCredit a better position in Lombardy, Italy’s economic engine. And it might get in the way if a more appealing international target came along. Strategically, the Italian bank would be better off buying Commerzbank AG, boosting its already considerable presence in Germany.

But it’s becoming clear that the Italian state wants to put domestic considerations back at the heart of the bank’s strategy. The appointment last month of Pier Carlo Padoan, Italy’s finance minister at the time of Paschi’s nationalization, as UniCredit’s next chairman showed the direction of travel. As my colleague Ferdinando Giugliano has noted, Rome has been reversing a decades-long shift on letting the markets take care of its businesses, and is now pursuing a more interventionist approach.

While this is troubling, there is also an argument that Mustier’s reluctance to grow the business in Italy could hurt strategically. Intesa’s purchase of smaller rival UBI Banca SpA has reinforced its dominant market share, hampering UniCredit’s ability to dictate prices and keep the best clients. France’s Credit Agricole SA is also buying a smaller Italian lender to bulk up in the country. Mustier’s insistence that the bank should shun domestic M&A for now may not pay off as the rest of the industry consolidates around him.

For Mustier, running the bank purely for financial returns was always going to be difficult for an outsider. For investors, the hope must be that UniCredit doesn’t sacrifice talent for political aims at any cost.

(The second and fifth paragraphs were updated to reflect the news that Mustier will leave Unicredit. )

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.

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