The last few years have been challenging for the banking sector. The impact of the pandemic, rising inflation and the prospect of a global recession are all looming large in a sector already facing digital disruption. Legacy institutions are being challenged by digital-only start-ups, with many older institutions struggling to change quick enough to compete.
There are few banking institutions in Europe with longer roots than the Italian giant, UniCredit. With a history that stretches back to the church banking of the middle-ages, UniCredit has evolved rapidly over the years to become a considerable player across Europe.
A new era at UniCredit
At this critical juncture in global banking history, UniCredit made the bold decision to appoint Andrea Orcel as their new CEO. Orcel is one of the industry’s most experienced and respected professionals, with a considerable reputation as a dealmaker. After taking the reins in April 2021, Orcel kept his counsel as he got to know the business better before outlining an ambitious set of plans for the group going forward.
Over recent years, UniCredit shareholders have had to be patient as the group sought to offload bad debt. Would they be rewarded for their patience or would Orcel require them to sit tight for a little longer?
A plan for the future
The answer came in December 2021, when Orcel outlined his strategy, fleshing it out further in an interview with Thomson Reuters. At the heart of this strategy was a commitment to generate dividends and buyback for shareholders worth at least 16 billion Euros over the next four years. He will achieve this through streamlining the bank’s operations and has made a commitment to cut back on extraneous spending, such as external consultancy fees.
Orcel has also promised to invest in technologies to speed up the digital transformation process over the coming years. This, he predicts, will deliver significant savings over time.
His announcement was immediately welcomed by shareholders, with the group’s share price rising by 11%, bringing the gain for the previous months to nearly 70% after a tough 2020 for the entire banking sector.
Acquisitions and ESG
The two other planks of Orcel’s strategy are his approach to both mergers and ESG. Orcel has stated he’s open to potential acquisitions but the criteria he will apply to any potential deal will be exacting. The fit has to be right and any deal has to bring something to the group.
Another factor he has been keen to emphasize is an extra focus on ESG, with sustainability as a key factor over the coming years. He hopes that UniCredit can set a positive example not only to other banks but also to their own commercial clients.
Ambitious but achievable goals
Orcel’s plans have been seen as being ambitious but achievable. The bank has made steady, pragmatic progress since Orcel took up his position. With Orcel at the helm, it’s widely believed that UniCredit is in safe hands and looks better placed than many of its competitors to be able to adapt and grow in today’s challenging circumstances.
