How Italy’s oldest bank turned on its saviour CEO
Monte dei Paschi di Siena’s board stripped Luigi Lovaglio of his powers, setting up a fight for its leadership
Luigi Lovaglio helped rescue Italy’s oldest bank but he could not survive what came after.
As chief executive of Monte dei Paschi di Siena, Lovaglio steered it back to profitability and returned it to majority-private ownership after its state bailout in 2017. Then he turned predator, with an ambitious — and successful — bid for more prestigious rival Mediobanca.
Yet despite backing from his board throughout the most controversial parts of his Mediobanca takeover plan — merging the Milanese institution into a bank that had to be bailed out by the government less than a decade ago — the board has in recent weeks turned on him.
His fellow directors voted earlier this month to exclude Lovaglio from the list of candidates to serve another term. On Wednesday, they revoked his powers as chief executive with immediate effect.
Unless enough shareholders back a rival slate of candidates put forward by a small shareholder that includes Lovaglio, he will be officially ousted as the chief executive of Italy’s third-largest lender on April 15.
Lovaglio’s Mediobanca deal was the culmination of a string of manoeuvres by both Giorgia Meloni’s right-wing government in Rome and the billionaire investor Francesco Gaetano Caltagirone.
For decades, MPS was the problem child of the Italian banking system, mired in scandal and hobbled by political machinations around the foundation that once controlled the bank, with its close ties to the country’s leftwing establishment.
MPS’s re-privatisation, substantially completed in 2024, was meant to draw a line under one of Italy’s costliest banking rescues.
But the way the government engineered its return to private hands turned the bank into an instrument of power for Meloni and Caltagirone that has weakened Milan’s traditional grip on the financial establishment.
When the Italian government sold a chunk of its stake in 2024, it allowed Caltagirone and another billionaire-linked investor, Delfin, to build sizeable holdings in MPS.
Both were seen as friendly to Meloni’s government and supportive of Rome’s desire to create a third pillar of the banking system to counterbalance the country’s two largest banks, Intesa Sanpaolo and UniCredit.
The support of Caltagirone, Delfin and the Italian Treasury, which still had an 11 per cent stake in MPS before the Mediobanca deal, was key to the success of the hostile takeover. Caltagirone and Delfin were also two of the biggest shareholders in Mediobanca.
But suspicions that Caltagirone and Delfin moved in lockstep, in breach of market rules, triggered a market-manipulation investigation that drew in Lovaglio, Caltagirone and Delfin’s chief, Francesco Milleri. Lovaglio, Caltagirone and Milleri deny wrongdoing.
Board insiders said the market-manipulation probe had become too great a risk for MPS as it embarked upon the fraught integration of two lenders. Others said the inquiry merely compounded Lovaglio’s deteriorating relations with key shareholders, including Caltagirone.
Lovaglio is now locked in a battle for his job with Fabrizio Palermo, Caltagirone’s close ally, and the rest of the MPS board.
Caltagirone has denied involvement in any boardroom intrigue. (Caltagirone did not respond to a request for comment for this article.) However, insiders at both MPS and Mediobanca say he remains a key figure in shaping the group’s future.
Lovaglio and Caltagirone clashed over control of Mediobanca’s 13 per cent stake in Generali, a large investor in Italian government bonds that has long been a focus of the Roman billionaire, according to insiders. Lovaglio said last year the Generali stake was not “strategic”, and refused to rule out a potential sale.
While Mediobanca retained control of the Generali holding, that was less of a concern. Insiders say Caltagirone was instrumental in the choice of Mediobanca’s new chief executive, Alessandro Melzi d’Eril.
With the forthcoming full merger of Mediobanca into MPS, however, control of the Generali stake would pass to MPS’s board — and its chief executive.
Having Palermo as CEO would give Caltagirone another friendly bank boss.
Palermo was a key figure in Caltagirone’s failed campaign to oust Generali chief Philippe Donnet in 2022 and now sits on the insurer’s board.
Caltagirone has a son who already sits on MPS’s board, Alessandro; he is a director at the utility company Palermo currently runs. Last year, Palermo launched a consultancy with Caltagirone’s right-hand man, Fabio Corsico, although public records show it operated for only a couple of months.
Despite having limited banking experience, MPS said on Tuesday that Palermo scored highest “based on objective and pre-determined criteria, including professional experience, managerial skills and consistency with the bank’s strategic needs”.
On MPS’s ranking, Palermo beat former Intesa Sanpaolo chief executive Corrado Passera and Carlo Vivaldi, a former top executive at UniCredit.
MPS has said that the bank needs new management as its focus shifts to a different type of challenge: integrating its new purchase and forging a combined strategy as the country’s third-largest bank.
According to people with knowledge of the internal discussion, MPS has lodged a complaint with the European Central Bank against the board slate which includes Lovaglio as CEO.
“Palermo’s profile is the most suitable . . . to support the bank in its ongoing phase of industrial transformation and strategic evolution,” it said in the statement.
As well as the market manipulation probe, Lovaglio faces another legal challenge, along with the bank’s chair Nicola Maione — who is being recommended for another term.
The activist investor Bluebell, which owns 25 shares in MPS, launched a civil liability action which alleges the deal should have been treated as a reverse takeover because it handed former Mediobanca shareholders 59 per cent of the combined group and MPS’s just 41 per cent.
Determining whether a deal amounts to a reverse takeover is not just a question of mathematics. Such an assessment also takes into account who controls the combined entity, including through the composition of management bodies.
MPS told the FT that it had discussed the characterisation of the transaction with the Italian financial regulator Consob, which ruled out a reverse takeover. A regional administrative court last September ruled out blocking the tie-up from completing on the basis of the reverse takeover argument, although it did not decide on the merits.
Investors will be given the opportunity to express their views on the Bluebell action and the rival slates of directors at a shareholder meeting. Still, the tussles emphasise the struggle for influence between competing groups of shareholders in the new banking group.
“Lovaglio’s ousting risks signalling that strategy at MPS is still contingent on opaque alliances rather than on a stable mandate from investors,” said one London-based lawyer.
They added: “If the board cannot show that succession is orderly and that the bank’s strategy is not hostage to factions, the market may conclude that MPS has changed its earnings profile faster than it has changed its DNA.”
