December 1, 2023

Investment Banking

Let Your Investment Banking Do The Walking

UniCredit’s Workaholic Boss Bounces Back After $54 Million Win

(Bloomberg) — Ever since Andrea Orcel took the helm at UniCredit SpA, investors have been waiting on the famed dealmaker to sniff out acquisitions for the Italian lender. A few weeks before the Ukraine war, it appeared that one of them might have involved Russia.

Instead, a possible takeover of a Russian bank was shelved and the firm’s exposure to the pariah state has cost it $2 billion in charges and a 33% stock plunge. But ever the bounce-back artist, Orcel sees the turbulence offering a different path toward building a continental powerhouse.

“UniCredit was built with a vision and the vision was to be the bank for Europe,” Orcel, 59, said in an exclusive interview with Bloomberg Television’s Francine Lacqua. “If there’s a silver lining in the tragedy we’re going through with Russia and Ukraine, it’s that Europe seems to have come together.”

With a presence in 13 countries including a big business in Germany, Orcel said UniCredit is “uniquely positioned” to take advantage of closer financial ties in the European Union. While the bloc’s banking union remains a work in progress — and Orcel see most growth opportunities as internal — he signaled that the war has fostered a spirit of cooperation that could drive integration.

“We want to strengthen our position in our perimeter,” he said. “If we find acquisitions that make sense strategically, they reinforce our position, they accelerate the plan that we have in the single country or client segments that we have, and that can be done at attractive terms, we will do them.”

Orcel, a tireless workaholic who colleagues say is both loved and disliked, certainly shows no signs of slowing down after a year at UniCredit. He took up kickboxing when a previous job offer — to become chief executive officer of Spain’s Santander SA — was withdrawn amid a salary dispute. Buoyed by a Spanish court’s January ruling that Santander must pay him 51 million euros ($54 million) compensation, he seems fully engaged in his latest fight: Trying to make Italy’s second-biggest lender a contender.

Read More: UniCredit Says It’s Mulling M&A Plan Amid Report of BPM Interest

The former UBS Group AG investment banker has rarely been out of the headlines in his new job, with first the failed takeover of Italy’s troubled Banca Monte dei Paschi di Siena SpA and then a leaked interest in rival Banco BPM SpA, making merger speculation a constant theme. He described his first year as “outstanding” and “stressful, but I like stressful.”

The Western sanctions on Moscow have meant that, like some of his peers, Orcel is also having to disentangle the bank from its extensive Russia operations. Bloomberg reported last week that UniCredit is in preliminary talks for the sale of its Russian unit after it was approached by interested buyers.

Read More: UniCredit in Talks to Sell Russia Unit After Buyers Approach 

“The options are very much affected by the next wave of sanctions, by who are the counterparts, what we can do, what we cannot do,” Orcel said. “And at the same time, we should not forget that we do have 4,000 employees in Russia. We do have 1,500 corporate clients.”

Whatever the outcome, the CEO has ruled out any additional capital hit under a worst-case scenario from a Russia exit, after the almost 2 billion euros in provisioning and impairments taken in the first quarter. “We have to remember that 95% of the bank is not in Russia. And we cannot commit the mistake of spending the entire time on Russia,” he said. “We have a situation room that is fully committed” to managing the exposure. “The rest of the team is 105% or 110% focused on running the rest of the equation.”

Read More: UniCredit Takes $2 Billion Hit on Russia to Cover Potential Exit

Orcel has won plaudits for reviving confidence in UniCredit and moving it from restructuring to focusing on growth. In his first significant move after succeeding Jean Pierre Mustier in April 2021, Orcel drastically reduced the ranks of top management to simplify decision making. 

He’s exited businesses and cut jobs in non-core locations such as New York and Tokyo, as he shifted to more lucrative products and capital-light activities. He’s buoyed investors by rolling out one of the most generous shareholder payouts in Europe, worth at least 16 billion euros through 2024. 

Even amid the war-related economic downturn and inflation surge, Orcel said UniCredit can still deliver on that pledge. That’s “if we keep our eyes on the ball and execute.” The slowdown is “in part compensated by higher rates, which are good for banks.” Despite the sharp fall that followed Vladimir Putin’s invasion, UniCredit shares are up 17% since Orcel’s arrival.

Read More: UniCredit Cheers Investors With $18 Billion in Planned Returns

Orcel started his banking career at Goldman Sachs Group Inc. before joining Merrill Lynch in 1992 as an adviser to financial institutions. While at Merrill he helped arrange the 1998 combination of UniCredito and Credito Italiano, creating the institution that he took over last year. In 2012 he moved to UBS Group AG, becoming head of the securities unit. 

Current and former colleagues describe him as demanding and direct. After setting his sights on running a large bank himself, he eventually jumped ship to take the CEO spot at Santander, a lender he had a long history of advising. That move blew up in the pay squabble, leaving him sidelined for two years as he sued the Spanish giant.

Read More: Orcel May Have to Wait Years for His $77 Million From Santander

The case saw Orcel face off against Santander Chairman Ana Botin. “I will always be sorry for how it went,” he said. “For me, it was more about confirming the facts, confirming the truth that I knew existed,” adding that “at least mentally I have moved on.”

Might he be tempted in the future by other high-profile posts, such as CEO of Credit Suisse Group AG? “I love UniCredit too much,” is the brief answer.

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