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Interview of Federico Ghizzoni, the CEO of UniCredit : «We will not give up Mediobanca» ("Corriere della Sera ")

13.07.2011

Interview of  Federico Ghizzoni, the CEO of UniCredit: «We will not give up Mediobanca»

By STEFANO RIGHI

No contact with the Libyans, but if they should decide to withdraw, we have already received expressions of interest. In the markets, we are associated with country risks. Therefore, a regulation of rating agencies is urgently needed.

Unicredit will not reduce its quota in the syndicate that manages Mediobanca, with the agreement expected to be renewed by the end of the year. And if, once the future of Libya looks more certain, Tripoli will want to sell its 12.198 percent stake in Unicredit, there will be no problems: there have already been expressions of interests. In this interview, Federico Ghizzoni, who succeeded Alessandro Profumo in 2010, addresses many topics, from tensions in financial markets to the reorganisation of the group he manages.

Mr Ghizzoni, almost ten months later, at what point is Unicredit now?

«The first distinction that we need to make is between what goes on externally, the development of the markets, and what goes on internally at Unicredit. Geopolitical and financial turbulences are not to be confused with the development of the real economies. With regard to the latter aspect, it seems to me that we have seen a slight recovery, at least compared to the last few years. Of course, this differs from one country to another. When looking at Europe, we see that Central and Eastern Europe reports 4 percent average growth, compared to around 3 percent for Germany and Austria. Italy has seen less growth, but in general, the real economies are experiencing a recovery.»

A fragile recovery that may be destroyed by the financial markets.

«The situation is extremely volatile and delicate. The euro is under constant pressure, which in turn can have unexpected consequences for companies. I will explains this using the example of a company I know well: Unicredit. On Wednesday, July 6, our share price dropped more than 7 percent on the Stock Exchange over tensions related to Portugal. Unicredit has an exposure of less than EUR100m in Portugal, EUR80m in Ireland and EUR800m in Greece. For these three countries combined with Spain, our exposure amounts to less than EUR1.5bn, compared to assets of about EUR910bn. Nevertheless, we lost 7 percent on the same day that our German subsidiary issued a senior bond that was very well received at 100 basis points for EUR500m, with demand for almost EUR600m... Such developments are difficult to explain, even taking into consideration the emphasis that is always placed on the stock considering it is extremely liquid and on the perception of the country risks, which are different for France and Germany.»

What do you think of the rating agencies?

«They need to be regulated themselves. A more effective control system is needed. They are very self-referential.»

When will the minor private shareholders who have invested in Unicredit get back their capital?

«We intend to inform our smaller shareholders better on the effective value of the group and the potential of the stock. Currently, the Stock Exchange does not even reflect the invoice value of the bank.»

What has been the biggest change compared to the final stage of Mr Profumo’s leadership?

«We have changed the governance of the group. When you look at the 15 or 16 highest-ranking employees at the bank’s top level, we have added 6 or 7 new people and have allocated different positions to others. This means that there has been a certain renewal in the management, which helps the bank achieve real, tangible results. We are currently elaborating our industrial plan. Today, we are a European bank that fulfils the functions of a commercial bank, which are inherent in our DNA. Our aim is to become the leading bank in Europe for retail and corporate clients, which is a segment in which we have much expertise. We are the leaders in Europe with regard to the number of countries in which we are active (22), the number of stores (10,000), our clients (35 million) and our employees (160,000). It is important to focus our operations on the real economy and this is what we intend to do.»

You are doing better abroad than in Italy...

«Our geographic location is enviable. We take third place in Germany, second in the corporate segment, where we have surpassed Deutsche Bank in the loan portfolio. Central and Eastern Europe are doing well and we benefit from that. Italy is finally turning around.»

Loans weigh double in Italy.

«It is true that, compared to our competitors, especially Intesa, we have a greater problem when it comes to risks. But our clients are responding well and the country is recovering. The figures are lifting the spirits of the troop... »

You have repeatedly emphasised that Unicredit is not planning any more recapitalisations. Then, it was disclosed that this will depend on the SIFI rules. What is your position on this matter?

«We have very clear ideas about capital and we are optimistic. We are defining our industrial plan. We are waiting for the SIFI rules and once they have been established we will decide what to do.»

So we will know after summer…

«Yes. At the moment, we believe that we are in the lower-to-medium range of global SIFIs. So-called additional capital will be categorised between 1 and 2.5 percentage points. It is expected that there will be three categories of banks, with the most systemically important at 2.5 points, the next category at 1.5 points and the least systemically important at 1 percent. We should be between 1 and 1.5 points. This means that from the seven percent which is the basis, we should be at 8 to 8.5 percent. Making all the necessary adjustments (Basilea 3), we have already reached this point.»

This means that Unicredit may launch a new capital move…

«Today, we all agree that capital needs to be higher than in the past. But I do not agree with recapitalisations at an extent that will then create profitability problems… Today, the scarcity of capital is punished, tomorrow, the focus may be on return on equity. It is important to find a balance.»

You arrived in October and shortly thereafter, the Banca Unica operation was launched, which has changed the shape of Unicredit. At what point is integration now?

«We are very satisfied. The greatest contribution of Banca Unica is that it has brought us much closer to our clients in the area.»

Your bank had withdrawn itself, setting other priorities, preferring to distance itself…

«This is no longer the case. For companies with a revenue of up to EUR50m, we have made all the decisive capacities available in terms of loans and network conditions. Response times are at 3 to 4 days. 93 percent of loan petitions are decided on locally and almost 100 percent of questions concerning conditions, from rates to duration, are settled locally. The change can be felt and it is very positive.»

So Unicredit is (finally) closer to its clients?

«We are working to greatly simplify our operations. We are committed to becoming a bank that our clients can easily deal with. This means some very radical changes for us. We will need to dismantle a rather complicated machinery. Today, there are too many levels between the branch and the client. We are shortening the manager chain and simplifying our model in order to bring the bank closer to the clients and the area.»

Another change compared to the past is that you are paying closer attention to domestic affairs. Once, Unicredit seemed aloof, now it steps in to save FondiariaSai.

«This is not a question of being a bank in or for the system. What is important is that we want to be much more present in the business of our clients and we want to accompany them in growth. I am less interested in the well-to-do. Concerning Fondiaria: We have acquired this ample 6 percent stake because there was no alternative. With the withdrawal of the French, our choice was to leave the company in a precarious position or make this move. In fact, I am not interested in managing Fondiaria. I am interested in having a management that works for the restructuring of the company. I am not interested in having advisers in charge of Mediobanca, RCS or Generali. All we are interested in is restructuring. This is an important task that needs to be completed... After that, the Ligresti family will decide what to do with the company. I am interested in returning.»

You have mentioned Mediobanca. Your bank is an important shareholder, with a 9 percent stake, and in some areas, also a competitor…

«I do not really consider Mediobanca a competitor of Unicredit. There are overlaps, but these are only partial. Our aim is to increase the value of our stake. The focus is on business growth, not power structures.»

What will you do when the pact with Mediobanca expires, which is expected to happen in a few months?

«We will stay where we are, and at the same level.»

Are the foundations, which have campaigned for you to replace Mr Profumo, still the best possible partners?

«As far as I am concerned, maybe I am still in the honeymoon phase: the relations are excellent.»

Also because the foundations are content that you are always saying there will be no recapitalisations…

«(laughs) We will decide on a recapitalisation, which is currently not on our agenda, once the external conditions concerning the SIFI rules and the required asset factors will be established, but, as I have said before, our current levels should already meet the requirements…»

How are the relations with the Libyan partners?

«The situation is complicated. Vice-president Bengdara is still a member of our board, but on a personal mandate, as is required for all executives. We have no more ties with yesterday’s Libya. Instead, we are closely watching what could become tomorrow’s Libya, the new temporary government that is being formed. I hope there will be a fast solution.»

But what if Tripoli wanted to withdraw from Unicredit tomorrow?

«I believe that they would have no difficulties in doing so, not from our point of view nor from their own. There have already been expressions of interest.»

Where will Unicredit be in one year?

«I believe we will have completed our business relaunch. We will have realised half of our industrial plan and we will still be number one in Central and Eastern Europe. The capital allocated to this area will increase gradually, because we will have higher returns in this regions and Italy’s turnaround will still be in full swing. In general, I am optimistic.»

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