By Valentina Za

MILAN (Reuters) – Italy’s UniCredit on Tuesday sought to dispel concerns it may agree to take on state-owned Monte dei Paschi after the board pushed out Chief Executive Jean Pierre Mustier.

Mustier’s abrupt resignation on Monday following a clash with directors sent shares tumbling 8% due to concerns UniCredit would stray away from the CEO’s line that prioritised returning cash to investors over mergers and acquisitions.

News of Mustier’s departure comes as the Rome Treasury steps up efforts to find a buyer for Monte dei Paschi (MPS), the bailed-out bank for years at the fore of Italy’s banking crisis.

Sources had said Mustier, a former investment banker, had set strict terms in talks with Rome over MPS, which he was reluctant to take on having worked in recent years to reduce UniCredit’s exposure to its fragile home turf.

“The board will never agree to any transaction that would harm the interests of the group and in particular its capital position,” a UniCredit spokesman said on behalf of directors.

“The group will continue to support the economy and distribute capital to shareholders.”

The spokesman said the bank stood by its capital distribution policy which would be implemented as soon as regulators allowed it.

A dividend ban triggered by the pandemic has stalled Mustier’s plans to return excess capital to shareholders, after he shed assets worth 14.5 billion euros ($17.5 billion) to rebuild UniCredit’s capital reserves and raised 13 billion euros in a share issue.

The French investment banker has won respect across the industry for his four-year overhaul of the Italian lender.

But his opposition to mergers, which he said were “no panacea”, has set him at odds with the consolidation fever sweeping Italy’s fragmented banking sector.

Piling pressure on Mustier, Intesa Sanpaolo overtook UniCredit as Italy’s No. 1 bank this summer thanks to its surprise takeover of peer UBI, further cementing its domestic dominance.

People familiar with the matter have said Mustier faced discontent due to his lack of a clear commercial strategy and failure to lift the price of the shares, which traded at 66% discount to book value versus Intesa’s 45%.

UniCredit’s Chairman-elect Pier Carlo Padoan, a former Italian economy minister who oversaw the MPS bailout, and the board are now leading the search for a new CEO.

JP Morgan said the successor to Mustier, who this year turned down the top job at global giant HSBC, would “have big shoes to fill given Mustier’s strong track record on cost management and delivering on targets.”

But they said a new CEO would benefit from Mustier’s revamp of the bank and a stronger balance sheet.

UniCredit is the latest major European bank to announce a CEO departure this year, with Credit Suisse Group , UBS, ING, Commerzbank and Lloyds all making leadership changes.

Credit Suisse said on Tuesday Lloyds CEO Antonio Horta-Osorio would become its new chairman next year, a day after the British lender said the Portuguese banker was to be replaced by HSBC’s wealth and personal banking head Charlie Nunn.

(Additional reporting by Simon Jessop in London, Andrea Mandala and Danilo Masoni in Milan; Editing by Edmund Blair and Lisa Shumaker)

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