New UniCredit chief executive Andrea Orcel has announced a stark reversal in strategy to that pursued by his predecessor, Jean Pierre Mustier, and opened the door to the Italian bank making acquisitions.
Speaking on Thursday at the bank’s first quarterly results since he joined three weeks ago, Orcel said he would focus on growth and added that UniCredit had the “talent” to achieve more than it had.
UniCredit followed European rivals in posting better than expected profits for the first three months of the year on the back of frothy markets and lower loan losses.
“My ambition . . . is to move UniCredit decisively away from a phase of significant restructuring and retrenchment, to one that delivers sustainable returns above the cost of equity across the cycle,” said Orcel, who added that he would unveil his full strategic plan in the second half of the year.
He added he would consider M&A deals, as UniCredit continues to be linked with acquisitions for smaller domestic rivals, including the state-owned Monte dei Paschi di Siena.
“With respect to M&A, it is not a purpose in itself, but I do see it as an accelerator and a potential improver of our strategic outcome,” said Orcel, who previously headed the investment bank at UBS.
Net profit for the first quarter was €900m, compared with €200m in the previous three-month period. Revenues rose 10.6 per cent to €4.7bn compared with the fourth quarter, boosted by a higher trading income and fees, which climbed to €1.7bn, the highest level in five years.
UniCredit shares rose 5 per cent on Thursday, adding to their 45 per cent gain over the past six months.
“We see future clarity on strategy as the main driver for a re-rating, but this set of results is showing some improvement in gross operating profit recovery and continued strong capital level,” said Azzurra Guelfi, an analyst at Citigroup.
Meanwhile, net interest income slipped 3.1 per cent to €2.2bn in the quarter from a year ago. The Milan-based lender said this was due to lower market rates, competition and government-guaranteed loans in Italy hitting rates, and weak demand in the corporate and investment banking division.
The lender said it was on track to distribute the previously announced €1.1bn in dividends and share buybacks as it confirmed guidance on net profit for 2021. At its annual meeting last month, shareholders approved an extraordinary distribution of an additional €652m in share buybacks this year.
During his four years running UniCredit, Mustier prioritised returning cash to shareholders over acquisitions. He focused on shoring up the bank’s balance sheet, cutting costs, closing branches and selling assets including asset managers Pioneer Investments and Fineco.
The French former paratrooper eventually fell out with UniCredit’s board over strategy and announced his departure last year.
On Thursday, Orcel said UniCredit had “some exceptional talent that can deliver far above the current level once empowered to achieve this objective”.
Orcel became chief executive of UniCredit last month. But his coronation at the annual general meeting was marred by a revolt over his potential $7.5m pay package, which passed the shareholder vote with a slender margin.
The 57-year-old orchestrated the $25bn deal that formed UniCredit 23 years ago while working as an M&A banker at Merrill Lynch.