At an event this year marking UniCredit’s new sponsorship deal with Ferrari’s Formula 1 team, the bank’s chief executive Andrea Orcel drew parallels between the two companies.
“These are two brands that started in Italy with dreams of creating something more global,” Orcel said. “In the case of Ferrari, truly global. And in the case of UniCredit, pan-European.”
However, his ambition for UniCredit is under threat. German opposition to an acquisition of Commerzbank by the Italian lender has forced Orcel to put takeover plans on hold, while Rome used extraordinary powers to block his attempt to buy smaller Milanese rival Banco BPM.
The setbacks raise questions about whether Orcel, a hard-charging dealmaker with a reputation for ruthlessness, will remain content running UniCredit in its current form, and whether Europe’s best-known M&A banker was wrongfooted in what should have been his natural territory.
He is clinging to his ambition of turning the bank into a regional powerhouse, telling the Financial Times that “when you talk about . . . the dream of Europe having large, pan-European banks, then we would be the first one to do it”.
But with two major targets off the table for now, analysts, investors and rivals want to know what Italy’s most valuable bank will do next.
Less than a year ago UniCredit believed its plan to seal two transformative deals was still on track, as it aimed to fully integrate BPM by June 2026 before launching a move on Commerzbank, according to people familiar with the matter.
But Italian Prime Minister Giorgia Meloni’s government deployed its so-called golden power — originally introduced to vet foreign takeovers of strategic assets — to block the swoop on BPM.
And while UniCredit rapidly built a 29 per cent stake in Commerzbank through share purchases and derivative transactions, opposition from the German bank’s board and Berlin — as well as a jump in Commerzbank’s market value — has forced it to wait until 2027 before deciding on a full takeover. Critics argue that career dealmaker Orcel misjudged the political mood.
“Banks are sovereign assets and important assets for a country,” said one senior European banker. “You cannot just decide to force your way in if a government is not comfortable. He wanted to push his way forward without taking into account the local sensitivities, which are important. He misread the political context.”
Another seasoned M&A banker was more blunt, saying the UniCredit chief “could have got these deals done if he was more conciliatory and there was less hubris”.
Orcel disagrees, saying Berlin was initially supportive of the plan by UniCredit — which already has a presence in Germany via its HypoVereinsbank subsidiary — to build a stake in Commerzbank.
Meanwhile, a postmortem carried out by UniCredit’s board concluded that political manoeuvring by the Italian government after the bank moved on BPM made it almost impossible for the bid to succeed.
“We didn’t expect the depth of political opposition around BPM given how much the transaction made sense, nor the way the golden power was ultimately applied,” Orcel said.
Despite the M&A roadblocks, shareholders and analysts remain bullish on UniCredit. Since Orcel took charge in April 2021 its share price has climbed almost 650 per cent — eclipsing its large European peers over the same period.
The stock has risen two-thirds this year, and analysts see further upside despite challenges. Of the 23 analysts covering the company, only two assign UniCredit a negative rating, according to Bloomberg.
Andrew Coombs, an analyst at Citigroup, said UniCredit had “significantly enhanced” its performance through steps including robust cost discipline, and that factors such as low credit provisions, rising fee income and efficient capital deployment should “drive further improvement” in returns.
But the boost to European lenders’ net interest income — the difference between the interest banks receive from borrowers and pay out to depositors — from higher rates in recent years is starting to wane. UniCredit’s NII fell more than 5 per cent in the three months to the end of September compared with the same period last year.
Orcel thinks the sector is facing a tougher period following several years of bumper returns. “The market has gone from being very pessimistic on European banks to potentially being overly optimistic,” he said. “We are preparing for a tougher environment.”
One thing that will help UniCredit is its stakebuilding in Commerzbank and Greece’s Alpha Bank, which Coombs at Citi forecasts will together add an incremental €800mn a year in revenues.
UniCredit’s 29.5 per cent stake in Alpha, which the Greek government has supported, raises the prospect of the Italian bank launching a bid for the €8.1bn lender, although Orcel has said that for “the time being” it will “remain at a level of participation below a full offer”.
But compared with some of its large European peers, UniCredit lacks comparable business lines in areas such as asset management, insurance, payments and investment banking that generate fee income.
The Italian lender’s previous leadership rationalised the bank by offloading subsidiaries, including the sale of asset manager Pioneer to Amundi and of online brokerage Fineco.
With few obvious large M&A targets left, industry observers speculate that Orcel’s focus will now turn to this fee-earning side of the group.
“In Italy, there are practically no [retail M&A] options left for UniCredit,” said a senior executive at another Italian bank. “It will now be about developing in areas like asset management, private banking, investment banking, expanding its international footprint and continuing to grow organically.”
Orcel, who says he will soon outline a growth plan for the bank in Italy that will be “all organic”, is already in the process of rebuilding parts of the bank’s asset management unit.
UniCredit has a contract with Amundi that allows the Italian lender to distribute the French asset manager’s products until 2027. Amundi, meanwhile, manages almost €70bn in assets for UniCredit in Italy.
Orcel is seeking to increase the portion of fees the bank takes in on the sale of funds, and has previously said UniCredit may not renew the Amundi contract. If it pulls its funds from Amundi, the Italian lender would have to decide whether it wants to manage them internally or strike a new deal with another asset manager.
“We have and will continue to build our own capabilities internally,” Orcel said, adding that when the bank achieves the capability “we will focus more on how we can increase the assets under management”. He said the focus would then turn to private banking, with the lender looking to expand the business by increasing its “mass affluent” client base.
He added that the bank would also focus on accelerating improvements to its technology to rival the “best-in-class fintechs”, as well as targeting a number of products and geographies that were deserted during the post-financial crisis retrenchment, including expanding in eastern Europe.
“I understand that it’s not as exciting as 2022-2023 when we were doubling net profit every year,” he said. “It’s not as exciting as last November when we announced a bid on BPM. But that’s how it is.”
Orcel added that he was “not excluding that we will bid on other things but, for now, we are exclusively focused on beating peers on profitable growth and outsized distributions”.
He also pointed out that M&A deals can act as a distraction, saying it had sometimes been “a struggle” to keep his management team and the organisation focused and disciplined on the basics over the past year amid the wrangling over BPM.
Meanwhile, UniCredit’s Russian business continues to pose a strategic problem for the group. Orcel previously said the bank’s commitment to leave the country was “absolutely clear” but was being held up by legal and regulatory hurdles imposed by Moscow.
He told the FT that efforts to wind down the unit — something it has come under pressure from the European Central Bank to accelerate — were ongoing, adding that it would be “practically eliminated” from the group by next year.
Shareholders appear sanguine about the position in which the bank finds itself. UniCredit has pledged to distribute at least €9.5bn to investors through share buybacks and dividends for its 2025 financial year, with Orcel saying in September that the bank had excess capital of €10bn-€11.5bn.
“He’s shown immense discipline,” said Cole Smead, chief executive of UniCredit shareholder Smead Capital Management. “Orcel has been the best at allocating capital among European banks. If it ain’t broke, don’t fix it.”
Another senior Italian investment banker cautioned that Orcel would lose leverage if he handed the excess capital to shareholders. “If he returns all of the capital, he loses the notion that he can pull off a big M&A deal.”
For all the challenges and setbacks, Orcel appears undeterred in his mission.
“UniCredit is a strange, wonderful animal,” he said. “We have a logo on the Ferrari. [We have] . . . the best income ratio and return on equity of our peers. The job is so fulfilling.”