Following the appointment of one of the world’s leading investment bankers, Andrea Orcel, to the role of CEO, investors were keen to learn more about his vision for the organisation.
Orcel comes with a reputation for delivery, established during a long and illustrious career taking in Merril Lynch, UBS, and Santander. His appointment to UniCredit represented a bold and ambitious move by the company.
Known for deal-making, straight talking and a strong commitment to ESG and better banking regulation, Orcel has been keen to set out plans for his new role.
Unsurprisingly, these are both ambitious and achievable, reflecting Orcel’s record for results throughout his career.
Investor confidence in UniCredit was illustrated immediately after its share value increased by 20%.
They then had time to ponder what Orcel would do with billions of Euros worth of excess capital while he performed a deep dive into the organisation ahead of issuing a bold set of plans for the future at the end of 2021.
In previous years, UniCredit had been working to rationalise its operation and reduce old loans.
Would Orcel now pass on the excess capital to investors, or would he use it to pursue a takeover befitting of his reputation as a dealmaker?
Bold ambition and a pragmatic approach
Investors received the answers they had been waiting for in December 2021 when Orcel set out his plans in detail, promising to immediately begin rewarding them for their patience.
First, he promised to deliver 10% returns, and to give €16 billion back to shareholders over the next four years. This will be delivered by streamlining the bank’s operations while investing in digital technologies. The bank will also make significant cuts to its consultancy budgets.
Investor payouts will begin with €3.7 billion in 2022. This will leave €4.5 billion in common equity capital above the ratio the bank is targeting.
The announcement had an immediate impact on investor sentiment.
UniCredit shares jumped 11% the following day, bringing their 12-month gain to nearly 70% after a challenging 2020.
With the share price at a relatively competitive level, many commentators are suggesting that UniCredit could be a well-priced investment if Orcel’s ambitious but pragmatic plans come to fruition.
The right deals at the right time
Orcel’s reputation as a dealmaker is second to none, and in his December statement he outlined his approach to takeovers and acquisitions.
While assessing that currently, any major takeovers in the European banking sector would be limited by the impact of the coronavirus pandemic, he identified that future UniCredit growth might be underpinned by acquisitions.
The timing of any deal would be crucial, with Orcel taking a no-risk, pragmatic approach to his decision-making while remaining willing to act when the time was right.
He has already rejected deals with Monte dei Paschi di Siena and Otkritie Bank while expanding their partnership with insurance provider Allianz in Italy and Germany. As a result, UniCredit products are now accessible via the Allianz digital platform.
Orcel has set a target of 10% returns over the next four years while embedding a comprehensive set of new ESG initiatives at the heart of the business. Orcel aims to put sustainability at the heart of UniCredit’s operation, so that the business can lead by example.
UniCredit hopes to inspire its clients and partner businesses to raise the bar when it comes to ESG while putting the bank at the centre of the wider European move towards sustainability.
It is early days, but the signs are encouraging. Orcel has set out an ambitious, but achievable set of plans to help the bank negotiate the challenges and opportunities that lie ahead.
With a strong record of vision and delivery, it’s not surprising that investors have been quick to spot UniCredit’s potential.