MILAN (Reuters) – UniCredit SpA chief executive Alessandro Profumo resigned yesterday, a source close to the matter said, his high-flying tenure at Italy's biggest bank halted by a row over Libyan shareholders and lagging results.

Profumo, Europe's longest-serving bank CEO, had steered UniCredit's rise from a regional bank to a pan-European player with operations in 22 countries.

Analysts say his departure could leave Italy's most international bank rudderless while it struggles to recover from the financial crisis after several acquisitions.

Profumo, 53, said he had stepped down in a letter to the bank's board ahead of an emergency meeting on Libya's growing investments in UniCredit. He had been at the helm since 1997.

"Profumo has resigned. He announced it in a letter to the board directors," said the source, who spoke on condition of anonymity. A bank spokesman declined to comment.

A second source close to the situation said a shortlist of candidates had already been drafted to replace the man Italian media dub "Mr Arrogance" and "Alessandro the Great."

The board will give Chairman Dieter Rampl three weeks to find a replacement, the source said.

A government source said Rampl would be named interim CEO on Tuesday.

UniCredit shares pared opening losses and were down 1.4 percent at 1.912 euros. The STOXX Europe 600 banking index was down 0.2 percent.

"It is crucial to find a replacement as soon as possible," said one analyst, who spoke on condition of anonymity.

Shareholders and politicians have accused Profumo of letting Libya increase its holding in UniCredit, the Italian bank hardest hit by the financial crisis, without informing other top managers.

The Libyan stake-building — and Profumo's possible role in it — sparked fear among politically connected shareholder foundations that Profumo was trying to marginalise them.

Libya's central bank and Tripoli's sovereign wealth fund have a combined stake of around 7.6 percent.

Bank rules bar a single shareholder from having a voting stake of more than five percent. Libya's sovereign wealth fund said relations between Libya and UniCredit were handled by Libya's central bank, suggesting they do not behave as independent investors.

The Libyan investments are part of growing links with the North African nation, which supplies much of Italy's oil and natural gas. Italy is Libya's biggest trading partner and Tripoli owns a stake in state-controlled oil firm Eni.

Profumo's relationship with Rampl had deteriorated over the last six months but the last straw was Profumo not telling Rampl about the Libyan investors, said one source in Munich, headquarters of UniCredit unit HVB.

Analysts say Profumo's support among shareholders overall had also been undermined by earnings that have yet to shake off the effects of the financial crisis.

UniCredit's return on equity is only about half the euro zone sector median, at 2.85 percent, according to Thomson Reuters data.

UniCredit shareholders, headed by the cash-burning foundations, were hit by two capital increases totalling 7 billion euros during the crisis. The bank only paid a scrip dividend on 2008 results in an effort to boost capital.

Profumo's plan to streamline Italian operations and cut about 4,100 positions also worried foundations concerned about local jobs.

With analysts stressing the need for a quick replacement, the Bank of Italy and the Economy Ministry are worried about the economic impact of instability at UniCredit, Italian newspapers reported on Tuesday.

Possible Profumo successors include former Goldman Sachs executive Claudio Costamagna and Matteo Arpe, former chief executive of Rome's Capitalia bank, which was bought by UniCredit in 2007.