(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.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Commerzbank appointed a new board member to oversee the German lender's corporate business on Friday after his predecessor left over differences about the division's future, the bank said on Friday. Commerzbank said that Michael Kotzbauer, who joined the bank in 1990, will take over from Roland Boekhout, who joined the bank at the start of 2020 and was previously with the Dutch bank ING. The decision was taken at an extraordinary meeting of the bank's supervisory board on Friday.
(Bloomberg Opinion) -- European bank bosses are on the front foot again. During the brutal first half of 2020, some lenders posted losses amid soaring provisions for bad loans. Now they’ve been emboldened by a third-quarter profit rebound. Most of the region’s bankers are sounding confident that the worst of the pandemic pain is behind them, despite the new wave of lockdowns. A dose of caution is warranted.Keen as they are to persuade regulators that they’re fit enough to resume dividends and boost trader rewards, Europe’s banks might be underplaying the potential impact of the economic contraction and an ongoing squeeze on profit margins. For a more sobering assessment of the industry, look at Germany’s Commerzbank AG, which has less exposure to the booming trading business than its rivals and expects to lose money this year. The German lender’s gloom is in marked contrast to its peers, including Italy’s Intesa Sanpaolo SpA and UniCredit SpA. Intesa is sticking with its profit target for 2021, and sees net income of at least 5 billion euros ($5.9 billion) in 2022, about a quarter more than analysts are forecasting. Similarly, UniCredit reiterated its objective for a profit of at least 3 billion euros next year after reporting third-quarter income that beat estimates. The bank is on course to earn closer to 800 million euros this year.Such certainty on how 2021 may play out is questionable. Banks have benefited from a surge in trading revenue this year — even France’s Societe Generale SA, which is scaling back its securities unit, improved both debt trading and equities revenue in the third quarter. But who knows whether market conditions will remain as favorably volatile? If the bumper trading profits ease off next year, banks will be more exposed to a decline in lending income. UniCredit saw revenue drop 7.8% in the first nine months of the year, even with the trading bonanza. It’s betting that it can repeat 9.5 billion euros of net interest income next year, driven largely by loan growth as economies recover.But no one knows how deep a scar the new lockdowns will leave. The euro area is headed for a double-dip recession in the fourth quarter, according to Bloomberg Economics.Key to European bankers’ optimism is that — after they set aside more than $69 billion in the first half of the year — the bulk of the bad-loan provisions are behind them. In this crisis, under new accounting rules, banks have had to take this action sooner for loans that may sour. But there are still valid doubts about the pandemic-ravaged economy overt the next few months.UniCredit’s chief executive officer, Jean Pierre Mustier, says things are looking better on non-performing loans, but he acknowledges that government-backed payment moratoria are only just expiring. That makes it difficult to draw conclusions about which customers will resume payments.Commerzbank is blunter still: “The rapidly evolving nature of the coronavirus pandemic means that the form and impact of the response measures” will need “to be monitored very closely over the coming days and weeks.” It suggests loan provisions might be higher than the 1.5 billion euros it’s targeting for 2020.Maybe Commerzbank, in the midst of a messy management change, has been lending to the wrong customers, making it more of a unique case. But the European Central Bank’s “severe but plausible scenario” estimates that non-performing loans at euro zone banks could reach 1.4 trillion euros this time around, far outstripping the region’s previous crises.The ECB will have this in mind as lenders try to convince it to allow the restart of shareholder payouts next month. Banker optimism only gets you so far.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.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.