MPS Boardroom Battle: CEO Showdown Looms

Shareholders of Monte dei Paschi di Siena (MPS) are set to vote on Wednesday to determine the bank's next CEO. The election centers on a contest between the ousted chief executive, Luigi Lovaglio, and Fabrizio Palermo, a candidate put forward by the bank's outgoing directors.

The outcome of this CEO selection is anticipated to play a crucial role in the ongoing consolidation of Italy's banking sector. Lovaglio has previously indicated his intention to pursue mergers and acquisitions for MPS.

This situation arises after MPS was rescued by the state in 2017 and subsequently re-privatized. Last year, MPS acquired Mediobanca, securing a significant stake in the insurance group Generali, a notable asset in Italian finance.

Disagreements emerged within the board regarding the proposed merger of Mediobanca into MPS. The European Central Bank has expressed concerns about governance weaknesses, potentially leading to increased capital demands for the bank. A change in CEO could impact the timeline for the shareholder vote on the Mediobanca merger.

Governance advisors ISS and Glass Lewis have backed the board's nominees led by Palermo but recommended voting against the chair and head of the nominations committee due to the succession process's perceived chaos. Major shareholders like Francesco Gaetano Caltagirone are supporting Palermo, while Delfin has not disclosed its stance. The Treasury plans to abstain, and Norges Bank has declared support for Lovaglio.