UniCredit is a banking group with a long and proud history.
Continuing that tradition, it has recently entered a new era with the appointment of Andrea Orcel as CEO.
He joins the bank at a critical moment, not only in its own history but also for banking in general. A range of challenges and opportunities are presenting themselves, demanding immediate attention as well as an overarching vision to guide the future direction of the industry.
Orcel’s arrival at UniCredit, Italy’s second-largest commercial bank, further highlights his reputation as a straight-talking dealmaker who achieves results.
Born in 1963, he is widely regarded as one of the best investment bankers of his generation and has been an outspoken advocate of strong regulatory frameworks, corporate social responsibility, and social governance.
Beginning his career at Merril Lynch in 1988, he remained at the organisation until 2012, when he moved to UBS. During his time at UBS, he oversaw a comprehensive restructuring before moving on to Santander in 2018.
In January 2021, the board at UniCredit announced that Orcel would be its new CEO following the retirement of Jean Pierre Mustier.
Because of his track record elsewhere, there was an immediate impact, pushing up UniCredit’s share value by 20 per cent.
As with any high-profile appointment, investors throughout Europe were keen to find out more about the new CEO’s vision.
Orcel provided some answers in December 2021, setting out a bold set of plans for the coming years.
First, he promised to deliver 10 per cent returns and to give €16 billion back to shareholders over the next four years. This will come primarily from revenue generated by streamlining UniCredit’s operations while investing in digital technologies and reducing fees for consulting services.
Those payouts will begin with €3.7 billion in 2022, leaving the bank with €4.5 billion extra in common equity capital above the ratio the bank is targeting.
Orcel also identified that growth would come through mergers and acquisitions. However, he also clarified that any potential moves in that direction would only happen if the terms of any deal met his own highly selective criteria.
Timing will also be a factor, with Orcel unwilling to commit to any deals if it’s not an opportune moment for the group. He expects the economic fallout from the coronavirus pandemic to make any major cross-border acquisitions difficult across the entire sector over the coming year.
Sealing the deal
Underlining his determination to only agree deals that can deliver real benefits to shareholders, Orcel rejected arrangements with Monte dei Paschi di Siena and Otkritie Bank.
However, the new CEO has championed the expansion of the bank’s ongoing partnership with German insurance giant Allianz in Italy and Germany, as well as across several central and eastern European countries.
As a result, UniCredit products can now be distributed through Allianz’s digital platform.
ESG at the forefront
Symbolising the new era for UniCredit is the strong commitment to ESG that Orcel is initiating.
Over the next five years, UniCredit will seek to deepen its dedication to sustainability and good business practices. Its range of environmental, social, and corporate governance (ESG) initiatives are expanding extensively.
Orcel has identified some of the contradictions in the ESG approach, citing the closure of carbon-hungry technology plants as being good for the environment. However, because it leads to redundancies, it is negative from a social perspective. For this reason, the financial sector will need to think hard about how it negotiates these challenges to deliver tangible results across ESG goals.
As the European economy transitions to cleaner energy and a smart, digital future, UniCredit has bold plans to lead by example. They hope this will encourage some of their clients to take similar bold measures when it comes to the environmental impact of their businesses.
The appointment of Andrea Orcel as CEO of UniCredit has been a bold move and with a well-thought-out and achievable vision in place.
The bank is set to enter the new era with renewed confidence.