When Andrea Orcel became the new CEO of Italian banking giant UniCredit in April 2021 it generated huge amounts of interest and expectation well beyond the group’s investors. Orcel has decades of global banking experience, and over recent years has built up a reputation as one of the industry’s premier dealmakers.

What would his plans involve and how did he intend to deliver them? Would shareholders be rewarded for their patience as the group focused on unloading its bad loans? 

An old bank looking to the future

UniCredit has a history that stretches back right to the beginning of European banking, growing over recent years to become one of Europe’s biggest with a significant presence in central and eastern Europe. Orcel plans to build on the past as he looks to move the bank into a new era.

He set out some of his plans in a recent interview titled Banking in Transition for the Thomson Reuters Breakingviews Predictions 2022 series. This followed a December strategy update where Orcel pledged to generate dividends and buyback for shareholders worth at least 16 billion Euros.

To achieve this, Orcel has set an ambitious 10% growth target for the group over the coming years. This target will be achieved by streamlining the bank’s operations over the coming years.

Orcel also hopes that significant investment in technology to speed up the group’s digital transformation will ultimately deliver reductions in the running costs of the business. Another key focus for cuts will be spending on external consultancy work.

Greater emphasis on ESG 

Orcel is keen for UniCredit to step up its commitment to environmental, social and corporate governance (ESG) initiatives. Orcel wants the group to set a positive example to other banks as well as its own corporate clients.

Orcel has specifically identified sustainability as a key issue with consumers increasingly demanding better environmental standards from financial institutions.

Considered dealmaking

Orcel has built a reputation as an accomplished dealmaker but his approach to acquisitions at UniCredit is likely to be marked by caution. While not being close-minded toward possible deals, he has set some strict criteria to guide the decision-making process. Any deal has to add value to the business and must be a strong strategic fit. Orcel recognizes that the banking sector has undergone considerable stresses over recent years and is currently in a state of flux.

Orcel has pointed out that UniCredit has fared better than many of its competitors over previous challenging years as a result of being diversified.

A positive response 

Orcel’s plans have been broadly welcomed by shareholders with shares in the group jumping by 11% following his December announcement. This brought their gains to nearly 70% after a tough 2020 for the entire banking sector.

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