The Profumo affair

By The Economist online | ROME

ALESSANDRO PROFUMO was the creator of UniCredit, Italy's biggest and most successful international bank. But his relations with its directors and some big shareholders have been deteriorating for some time and, on Tuesday September 21st, the bank's board called an extraordinary meeting and decided, after a lengthy debate, to accept his resignation as chief executive. The trigger for his departure was a row over Libya's stake-building in the bank—between them, that country's central bank and national investment fund now own around 7.6% of UniCredit. Mr Profumo rejected any suggestion that he had a hand in this, insisting that the Libyans had built their stake “autonomously”. But the share-buying angered right-wing Italian politicians, and brought to the boil a simmering discontent over what some saw as Mr Profumo's excessive autonomy.

After becoming chief executive of UniCredit's predecessor, Credito Italiano, in 1997, aged just 40, Mr Profumo won a reputation as a smart and far-thinking banker, creating a national financial champion through a series of big deals. In 1998, he oversaw the merger of Credito Italiano, itself formerly state-controlled, with five public-sector savings banks in northern Italy, to form UniCredito Italiano, subsequently changing its name to UniCredit. Between 1999 and 2002 it bought several banks in central Europe and in 2005 Mr Profumo engineered a merger with Germany's HVB, following this with the acquisition of Capitalia, a large Italian bank, two years later.

However, the financial crisis ended the flow of dividends to which UniCredit's shareholders had been accustomed; and the bank had to make calls for fresh capital, bringing hard times to the philanthropic foundations that had owned the five savings banks and which now own a combined stake of about 12% in UniCredit. As the savings banks themselves had once been, the foundations are political as well as philanthropic, with boards made up of party appointees and local bigwigs. Cuts in dividends from UniCredit have meant less largesse for them to bestow on good works such as repairing church roofs, helping hospitals and funding old people's homes, and also less influence.

The share-buying in UniCredit by two arms of Muammar Qaddafi's regime, coming on top of recent stake-building by another Arab government—that of Abu Dhabi—has caused indignation in northern Italy, where the xenophobic Northern League political party is strong. In the past, Italy's politicians enjoyed exploiting its financial institutions for their own ends, and of late the league's leaders have muttered about the need to regain control of what they regard as “their” banks. Mr Profumo was a strong defender of banks' independence from such meddling. Maintaining UniCredit's hard-won autonomy will be one of the biggest challenges for Dieter Rampl, its chairman, who will take over as interim chief executive, and for whoever eventually moves into Mr Profumo's office.

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