Stowarzyszenie Przejrzysty Rynek
Association for Transparent Markets
Unicredit Shareholders
By : Jerzy Bielewicz & Michel Marbot
Project Chopin
Breach of rules on competition and capital transfers by UniCredit CLICK
Please CLICK on the picture below :
The same actors again. Unicredit and Pirelli had co-managed Telecom Italia till October of 2006 just before Telecom became insolvent. In Poland, Pekao SA, Unicredit's Polish subsidiary, was forced by its parent into unfair long term contract with Pirelli. This way Pirelli acquired financial means to pay Unicredit Euro 475 million for worthless shares of Telecom Italia. Another case of money laundering and illigal crossboader transfers…
Jerzy Bielewicz statement at
UniCredit Shareholders' meeting of November 16, 2009
Ladies and gentleman, shareholders of Unicredit Group, Boards' members.
As Chairman of the Association for Transparent Markets I would like to address some of the problem areas connected with the capital increase proposed by our Board.
I shall highlight 4 key points.
My first point relates to the recent International Monetary Fund's Global Financial Stability Report. The IMF indicates diplomatically, without referring to any specific name, that Italian banks do not provide for due consolidation of the losses of their foreign branches and subsidiaries. The IMF bases its consideration on the fact that risks, and therefore losses, are by far greater outside than inside the Euro zone. The IMF points out that the lower the consolidation levels, the less significant are the loss provision rates.
Dear shareholders, I know only one Italian bank to which this statement may apply and this bank is our bank, UniCredit.
At this point, my question is: why does our Board approve an accounting policy that generates such doubts with the Chairman of the IMF and misleads the public? Ladies and Gentlemen of the Board, where are your objections? Where are your demands?
Dear shareholders, as you may know, Unicredit subsidiaries especially in Ukraine, Romania and the former Soviet Union require liquidity support. In the case of Unicredit Ukraine, our Polish subsidiaries Pekao SA injects tens of millions of Euro into the system every quarter but, at the same time, Pekao makes no provision on its investment in Ukraine. No accounting trick will solve liquidity problems. And this is why we are here today.
The Association of Transparent Markets notes Mr. Profumo's numerous statements in the media referring to the so called economic improvements and limited risks related to the Central European countries. At this point where does Mr Profumo's legal responsibility lay? And if the members of the Management Board abdicate their eminent and necessary role, from whom will the truth come from? From the little employees who fear for their job? From the small shareholders? Or from a public authority?
Confronted with the total lack of reaction of the Bank's bodies to our numerous warnings, we have established the Association For Transparents Markets. The Vice Chairman of our association is the former chairman of the Polish Parliamentary Investigation Commission on banks. I am here to tell you, with all my strength, that we are not going to let the Bank's management act secretly against the interest of those shareholders who do not have a privileged control of the Bank. We think that we must share principles of fairness and equal treatment among the shareholders.
When I use the word "secretly", I obviously have in mind the Project Chopin, upon which I have called your attention since 2007, but not only. Ladies and Gentlemen of the management and Supervisory Boards where are your inquiries? Where are your questions? Where are your conclusions? Not even one of you is interested in asking our view, our documents, the reasons of our fight? Nature hates void and putting your head into the sand will not help. Again, if you dismiss your role somebody else will take it and then you will appear as ccomplices of Mr Profumo's inept policy.
My second point refers to the general situation in the financial sector and my source will be again the IMF. According to this eminent international authority, banks have only accounted for a $ 1.5 trillion loss since October 2008. Still, this is less than half of what is required to cover the present risk of all financial institutions. By the end of 2010, $ 1.7 trillion of provisions will have to be passed, affecting the banks' results. The IMF indicates the banking sector as the weakest link of the real economy because it fails to cover the demand for credit, even though this demand has significantly decreased in our days.
The IMF also warns that the present euphoria might be fragile. Today banks invest the cheap money they receive from central banks in speculative activities on the financial market. By doing so, they shift the cost onto the public. This is why you are not fair, Mr Profumo when you state that you do not take advantage of public or taxpayers' money. According to Nobel Price economist and advisor to the US government Mr. Roubini, the speculative bubble is going to burst sooner than latter. I hereby ask Mr. Profumo to give us, today, the consolidated figure of all Unicredit Group's borrowings from the ECB, from the Central Bank of Italy and from all other Central Banks of the countries where we have branches or subsidiaries. I also hereby ask Mr. Profumo to give us, today, the consolidated figure of all our Group's speculative investments on the financial markets.
The Unicredit Board of Directors admits in its comments on this year's third quarter results that: "quarterly trend shows growth in net commissions, trading income which is once again at solid levels and lower net interest income." In other words, Unicredit goes further away from basic banking activities to risky trading. We get even some meaningful numbers: "Net trading, hedging and fair value income in the first nine months of 2009 amounts to €1.651 billion, a noticeable improvement on the -€730 million reported in the same period 2008." The management calls it "taking advantage of reduced risk". Mr Profumo, don’t' you feel your statement is a bit arrogant? The swing in trading income, from minus €730 millions to plus €1.7 billion, proves only how much more risk the bank carries on its balance sheet today. Unicredit has learned no lesson from the crisis! And would suffer a great deal, if we enter into a W shape scenario, as predicted by Mr. Rampl himself, Chairman of our Board of Directors.
Mr Profumo, you ask us today for supplementary cash. My next question is: what is your strategy? What will you do, when the quantitative easing will come to an end and interest rates will start rising again, to fight inflation thus eating our spreads? How will our present miraculous profits, based on public money be preserved? How will our market value as a Bank be preserved? Why should we trust you today and vote in favour of this capital increase while your policy has not changed and you go back to the former bad habits?
My third point is the following: in Great Britain and the Netherlands, the markets' regulators and the Central Banks decided to deal with the so called "too big to fall issue". As a consequence, the banks are being downsized and devided into smaller stand-alone financial companies according to their functions. I dare say: "Unicredit Group is one of these 'too big to fall' institutions, as proven by its lack of ethics in dealing with the real economy, with small organisations and shareholders". The Association for Transparent Markets calls for an action in every country where we are present as well as at European level in order to verify the compliance of our actions with the rules of competition. I have in mind not only and again the now famous, but still secret, Chopin project. I hereby inform our shareholders that the Polish prosecutor has accepted at last to open an inquiry on the way the Bank provoked the bankruptcy of the first Polish pasta Group. I have also in mind the political activity of the Bank in Poland and notably the use of this influence in order to control the management of a state owned Bank in Poland which is also our main competitor.
Ladies and gentleman, I will skip such important issues as shrinkage of Unicredit Group in terms of total assets, the fall in corporate lending or multi billion swings on off the balance sheet derivative accounts. For example in the case of Pekao alone, off the balance sheet value of derivative products decreased by approximately 20 billion Euro (2/3 of total assets of the bank) since the beginning of 2009. No explanation whatsoever was provided. Is this pure accounting manipulation? Where is the risk of existing operations accounted for?
And last but not the least, my forth point is the real problem which needs to be addressed immediately – the unlawful drainage of Unicredit's Polish branch, Pekao SA. Unicredit forced its CEE branches into unfair contracts with Pirelli Real Estate SpA. Pirelli bought the Pekao's real estate arm for € 20 million PLN. Six month later, Pirelli sold just 5 real estate projects out of Pekao Real Estate portfolio for € 80 million, that is 300% return in cash in six months. After this transaction the Pekao Real Estate was valued at almost €150 million by an independent third party. 1000% profit in six month – Mr Profumo do you call this an "arms length transactions"? Where is your responsibility? Moreover, Pekao and Pirelli signed a shareholders' agreement by which Pekao without any compensation granted to Pirelli exclusivity rights to all its real estate assets and to all the non performing clients' real estates. The contract was signed for 25 years while you, Mr Profumo were member of the Board of Olimpia, the Pirelli's subsidiary which controlled Telecom Italia. I dare call all the related cross border transactions between Pekao and Pirelli in Poland and UniCredit and Pirelli in Italy, money laundering transactions.
Dear Shareholders, recently Alister Darling, the UK's Chancellor of the Exchequer, blamed shareholders of British banks for what he called the failure to exercise their responsibilities as owners. I hereby encourage shareholders of Unicredit to take an action as owners of this business. I urged many times the top Unicredit management to take the necessary steps in order to face the global financial situation. If they continue to ignore our modest and rational advises then, Ladies and Gentleman, you are the owners of Unicredit and I call upon you to introduce great changes into this bank before it is too late.
