A Little More on Unicredit

The more I look at this Unicredit situation, the less I like it.

It looks like the proximate cause of former CEO Profumo's departure (which very much reads like a "jump ... or we push" situation) was two Libyan entities taking a combined 7.4% stake in the bank. Nevermind the fact that Unicredit needed to raise capital and large stable investors are typically a good thing, apparently this rankled some on the board and caused problems.

Truth be told, I don't know exactly what the problem is. Libya is not exactly fully rehabilitated in the eyes of the West and its not as though European institutions are overjoyed to see Arab/African investors buying their assets. And maybe that's part of what lies underneath the controversy - Libya and Italy certainly have a "history" together, and it probably aggravates the hell out of some Italians to see Libya buying into Italian assets from a position of relative power. With rumors that certain Italian politicians were displeased with this arrangement and making that known to the board, who knows exactly what role this had.

Whatever the case may be, the fact still remains that Profumo guided Unicredit from being just another Italian bank to being a major player in Europe - the second-largest bank in Italy, the third-largest in Germany, and the largest in both Austria and CEE. Even granting that the stock performed better in the first half of his tenure than the second, Profumo should still be appreciated by long-term shareholders.

And now it's time to see where the bank goes from here. There is definitely some need for restructuring at Unicredit, and perhaps that was also part of the CEO's departure - whether he wanted to go slower than the board or faster. So if Unicredit is about to change itself in some pretty significant ways, maybe it is better to do so with new management at the helm.

The vacuum at the top is certainly a big risk factor, as nobody can really say what the near-term direction for the bank is going to be (at least not until the new CEO lays it out). Likewise, it is fair to wonder just how this board operates and what sort of "non-operating influences" get to be played out behind the closed doors of the boardroom.

Still ... this bank was a quality company before the crisis and even if Italy sometimes seems like a perpetual economic and political head-case, it seems likely to be a good candidate for a strong recovery. I have enough European banking exposure for now (though Santander (NYSE: STD, Danske, and a few Swedish banks are enticing...), and would rather add in places like South America (Itau), South Africa (Standard), and Asia (DBS Group), but Unicredit seems pretty dang cheap right now.  Assuming that the board isn't daft enough to screw up over a decade of progress, this could be a good opportunity to buy a dip and get a quality pan-European bank.