Orcel answers key questions concerning the future of UniCredit

In April 2021, Andrea Orcel was named as the new CEO of Italy’s second-largest commercial bank, UniCredit.

He arrived at the bank with a reputation as one of the world’s leading investment bankers and a track record as a dealmaker.

An outspoken advocate for smarter regulation across the financial sector, his appointment was seen as ambitious and potentially transformative for the bank.

Initially, Orcel kept his cards close to his chest when it came to his future plans.

However, investors across Europe had questions about what his appointment would mean for UniCredit and how it would successfully manage a period of broader disruption and transformation.

Sustained growth 

In December 2021, Orcel finally provided investors with answers to some of their key questions.

First, he promised to deliver 10 per cent returns and give €16 billion (US $18 billion) back to shareholders over the next four years. This would be achieved from revenue generated by streamlining UniCredit’s operations and through investing in digital technologies. He also promised savings by reducing fees for external consulting services.

 

In a recent interview for the Reuters Breakingviews Predictions 2022 series, Orcel suggested that investors would need to be patient for concrete results. After an unexpectedly rocky start to 2022 for UniCredit and other significant players, the bank was back on track to achieve its goals for ambitious – but sustained – and achievable growth.

“We can take benefit in the fact that we have a diversified franchise, and that means that [world] events and choppy markets do not affect the franchise in the same way,” Orcel says. “Generally we are quite conservative, and we are focused on what we can control — and at the moment that seems to be working.”

The diversified nature of the group provides some protection during turbulent economic times with the poor performers offset by those parts of the group that are doing better. 

Mergers and acquisitions 

Orcel has a reputation across the industry as the consummate dealmaker, and there has been much anticipation around how he will deploy those skills in his new role at UniCredit. While being open to mergers and acquisitions, he has suggested that the criteria for pursuing any deals will be high. It reflects a measured and serious approach that reflects the current global economic climate. Now is not the time for high or even medium risk moves.

Orcel insists that the group is under no pressure to make deals and a priority would be placed on what they are already doing. He says he will consider any potential deals, but they will need to be a good strategic fit and provide real benefits to the group before he’ll consider proceeding. 

“My job is to say no to deals that do not meet all of the right parameters,” he says.

“If I look at 100 opportunities and say no for those reasons 100 times, I know that it appears like I might lose face, but in my opinion, I will be doing what my shareholders want me to do.”

The appointment of Orcel was a bold and ambitious move on the part of UniCredit and with a steady, pragmatic but ambitious approach already outlined, investors have good reason to be optimistic.