The former chief of UBS Investment Bank has become one of the most successful CEOs in Europe. But Andrea Orcel doesn’t rest on his laurels. He is targeting a larger acquisition and knows how to keep the investors happy.
He can be unequivocally described as a superstar in the European banking world. Andrea Orcel is CEO of the major Italian bank Unicredit, which also includes the German Hypovereinsbank. In a previous life, the Italian was also the head of UBS Investment Bank and aspired – albeit unsuccessfully – to the position of the then (and current) CEO Sergio Ermotti.
The 60-year-old now leads the second-largest bank in Italy (behind Intesa Sanpaolo) and is considered one of the most successful managers in his field, as he has increased the company’s stock price by 178 percent since taking up his post in April 2021 – and by more than 75 percent this year alone.
Addicted Investors
It is no wonder the financial community celebrates him so enthusiastically and has given him the nickname «Doc Orcel» among analysts: he repeatedly «calms» the «addicted investors» with big share buybacks, as the «Frankfurter Allgemeine Zeitung» (only in german, article behind paywall) writes in a feature piece.
The manager, who was born in Rome and paid pretty generously with an annual salary of 9.75 million euros, has a lot more planned, as he goes on to explain in the interview. Unicredit is one of the few cross-border banks in Europe. It is represented in 13 countries, including Hypovereinsbank acquired in Munich in 2005, which accounts for a quarter of the group’s business.
Jobs Inconspicuously Eliminated
But the executive attributes the success of the share price to much more than just pleasing the investors through generous share buybacks. «The Unicredit team has brought about a phenomenal transformation in the bank. It’s more efficient and effective today, the technology has been integrated and processes have been streamlined.» Therefore, the cost-income ratio is 39 percent – so «better than most competitors.»
As the «FAZ» also notes, Orcel has scrapped a lot of dual management positions, such as those recently introduced by investment house Vontobel, that were left to him by his predecessor Jean-Pierre Mustier. The Italian has also reduced the workforce by around 7,700 employees – quite inconspicuously, as the newspaper states. Today Unicredit employs around 74,000. Despite already having a low cost base, he believes he can still make «lots of efficiency gains.»
Major Acquisition in Sight
The Italian comes across as confident, energetically reeling off numbers like a classic investment banker. But he can also step back into cautious mode, as the «FAZ» writes. He is targeting a larger bank acquisition, but seems to be taking his time.
Unicredit is ranked only 14th among the largest banks in Europe, based on its assets, not its market capitalization. «I believe one of the biggest mistakes banks make is focusing on size – as it means they’ll start taking on too many risks. Therefore, our goal is to operate cost-effectively and generate more profits with fewer assets,» Orcel explains.
Experience in Streamlining
«An acquisition could, though, help us get the market to recognize our full value, which is not currently the case. We want to be a leading player in Europe,» the CEO says. «Unicredit has a wide range of options because of its 13 markets. And we know how to integrate and how to streamline.»
The bank also has surplus capital of 10 billion euros, which is the capital above the capital target of 12.5 percent of risk-weighted assets.
«We’ll only take action under the right conditions. Some banks don’t want to do business. Others have very inflated prices. So we’ll keep away, we’re disciplined,» Orcel assures. Should the banker be unable to find anything, he says he will continue with repurchasing his own shares in the interests of his shareholders. But the Italian remains confident in the interview: «It’s likely that we’ll make some acquisitions in the years to come.»
Unresolved Matter of Russia
In Russia, where the bank still employs 3,400 staff, Orcel does not want to simply give away his branch and around 3 billion euros to the regime.
«The strategy stays the same: we’re reducing our exposure. We’ve already scaled back our presence by more than 70 percent in two years; it used to be a very large business, but now we hold less than 1 percent of the market,» Orcel admits. The Russian economy would «essentially no longer support» Unicredit.
