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CommentP&M Notebook

P&M Notebook: The defenestration of Milan

UniCredit needs a new boss and a new strategy. But the industry as a whole could do with some stability.

It finally happened. After weeks of speculation, shadowy briefings and shareholder disgruntlement, UniCredit’s chief executive Federico Ghizzoni has handed in his resignation, leaving the board and chair Giuseppe Vita to start the search for a new boss.

The whispering campaign, from the outside, seems eerily reminiscent of those against the previous management at Barclays, Deutsche, Standard Chartered and Credit Suisse. First: establish by repetition that a firm doesn’t have enough capital, or is going in the wrong direction. Then, sow doubt and discord. Push for radical measures, decisiveness. Finally, Criticise high profile cock-ups (the sole underwrite of Vicenza’s IPO, in this case, though UniCredit escaped that one with laughably little damage).

A radical, decisive restructuring worked well enough for UBS — but it had the benefit of a supportive market to sell legacy assets and businesses into, and a relatively stable management team while it was executing.

So it will be a tall order to execute against a shaky market backdrop littered with landmines, while almost every other firm is also trying to sell assets. It’s too early to judge whether the various other restructurings will be judged successes, but Deutsche and Credit Suisse are certainly in unenviable position right now – and their competitors are lining up to take advantage of temporary weaknesses caused by the turmoil of reorganisation.

At least the kind of disposals UniCredit might contemplate are different — Deutsche and Credit Suisse have been optimising their markets businesses, selling derivatives books, leveraged loans, CLOs and the like. UniCredit, meanwhile, is more likely to spin out some of its regional offshoots — decent banks exposed to high-growth eastern Europe. First though, there’s that rights issue to get done.

On the small matter of who gets to do the CEO job, David Rothnie has the best run down of the candidates in question. The board is planning to appoint headhunters (will former UniCredit markets head Mike Hammond’s firm Sheffield Haworth get the nod?), but it seems like most of the likely names are already well known to the board — either they are UniCredit alumni, or work for businesses part-owned by UniCredit. Certainly, they will ideally be Italian.

One thing to put to bed is the persistent Orcel-to-UniCredit rumour. One UBS source described Orcel as “too ambitious” for the gig.

Certainly it would be a pay cut — Ghizzoni took home total comp of €5.13m last year, while the average for the UBS executive board (Orcel is surely on the high side of the average) was Sfr8m (€7.23m), with group chief exec Sergio Ermotti on Sfr11m.

But also, why leave UBS just when it’s riding high? The first quarter’s numbers weren’t exactly spectacular, but it is still one of relatively few firms in a position to press home its advantage while rivals retrench.

Even US firms are shedding staff. JP Morgan lost an MTNs banker and its liability management head for Europe this week, with both likely leaving the banking industry. GlobalCapital heard talk of some cuts at Goldman too – deeper than the firm’s annual 5% adjustment, but better than expected.

For DCM bankers, the industry is in less dire straits than for their secondary markets colleagues, but decent seats are still in short supply. One of those decent seats is being head of FIG DCM at Société Générale, as vacated by Sébastien Domanico. To nobody’s particular surprise, FIG flow DCM head Eric Meunier stepped up to the job, while Domanico found apparently found a head of DCM spot at Crédit Agricole.

Aspirant FIG bankers though, take heart – Mizuho is still presumably looking for a head of FIG DCM following AJ Davidson’s abrupt departure, unless the firm has given up and simply decided that Giles Parker, hired shortly after Davidson, should run the show. It might not have the most glamourous reputation, but believe it or not, it’s a top 10 bank in US investment grade, the biggest and most lucrative bond market in the world.

The best move, really, is to have your boss retire. Former JPM banker Carl Norrey, who recently received GlobalCapital’s lifetime achievement award (and a genuinely touching tribute from SSA origination head John Lee-Tin) announced his retirement in February, paving the way for expanded responsibilities for Richard Gustard, head of SSA trading (and now responsible for EGBs and sovereign derivatives) and Keith Price, head of SSA syndicate, who now has the covered bond, MTN and SSA origination business reporting into him too.

It’s a stable platform (Gustard has been with the firm since 1999, Price since 2000 and Lee-Tin since 2000) and doubtless will continue that way, to the chagrin of anyone trying to break into a firm which has only consolidated its hold on the bonds business since then.

In regulation, it’s been a busy but uncontroversial week. The Bank of England wants more capital in its banks, and wants to measure it slightly differently from everyone else. Foreign exchange traders will have to be more polite to one another (and more careful about repeating market rumour and gossip).

Such “codes of conduct” are likely to be rolled out across other FICC business lines, if the FX one proves successful — but how can anyone judge success? If anyone’s manipulating the FX market these days, they’ll be damn sure not to do it on Bloomberg chat.

Other informal, gossipy channels of information are under threat too. Sales notes could be crippled by rules on “investment recommendations” — which threaten to regulate sales in the same way as research.

Meanwhile, the FCA is in threatening mood, warning banks that using anti-money laundering and Know-Your-Client as excuses to close down unprofitable client relationships is not on. It’s unlikely to change much, but it looks like banks have to tread an increasingly fine line.

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