Doesn't anybody have faith in UniCredit anymore?

Banker and investors are looking for reasons to keep their confidence in the biggest bank in Italy, but they are hard to find.

"UniCredit is facing concerns over its governance and its capital levels", a recent article published by Financial Times states.

The Atlas fund, created in a hurry to increase confidence in the Italian banking system, bought the entire issue of stock made by the Popolare di Vicenza bank, amounting to 1.5 billion Euros, as "having it be subscribed by UniCredit would have made it necessary for the biggest bank in Italy to increase its capital as well".

A piece of news published last week by Wall Street Journal, also quoted in BURSA, was showing the same thing: the creation of the Atlas fund and the "rescue" of Popolare di Vicenza had as its secondary goal the protection of the biggest bank in Italy.

According to some sources among investors as well as some statements of the officials in Rome, "confidence in executive director Federico Ghizzoni and the top management of the bank has been dramatically eroded by the failure of intermediating the share capital increase of Popolare di Vicenza", according to FT.

The forced capital increase at UniCredit would have come amid "the concerns tied to the ability to meet the objectives for the next three years, according to the plan presented in November 2015", in the context of fears over "capitalization, profitability and the quality of management".

One of the top 10 shareholders of the bank thinks that UniCredit needs a capital increase anyway, according to the article in FT, but that "it cannot be done with the current management, which has lost the confidence of the market".

Another important shareholder told newspaper La Repubblica in the beginning of the year that "even though Ghizzoni is a good banker, perhaps the bank needs a radical change". The current executive director of UniCredit has been holding the position since 2010, when the Board of Directors removed Alessandro Profumo following the weak evolution of the stock price.

Despite what looks like a concerted "assault" of the market against the biggest bank in Italy, its executive director, Federico Ghizzoni, is "calm and rational", according to what a person close to him told Financial Times.

Ghizzoni emphasized several times that the bank doesn't need additional capital, but one of the most pessimistic opinions in the market, posted by the Barclays analysts, states that the capital may need to be increased by as much as 7 billion Euros.

It remains to be seen how much longer the "serenity" of the UniCredit CEO is going to last, considering that the bank's stock has dropped almost 40% since the beginning of the year, and the price of shares has reached almost half of the tangible book value per share.

Since the beginning of this month, the drop of the UCG shares on the Milan Stock Exchange has reached about 12%, and yesterday, the intraday decline exceeded 3%.

As for the capitalization, the Core Tier 1 capital adequacy ratio was 10.6% at the end of last year, close to the minimum required level of 9%, which the European Banking Authority requires from financial institutions of systemic importance, according to FT.

The financial results of the UniCredit group will be annouced today in Milan and represent "a crucial test for the management", according to the article in Financial Times.