UniCredit Turns to Its Creator Orcel to Revamp Italian Bank

Andrea Orcel, the dealmaker who helped assemble Italy’s biggest international lender more than two decades ago, is getting a shot to run the place.

The 57-year-old Rome native is set to be appointed chief executive officer of UniCredit SpA, replacing French investment banker Jean Pierre Mustier, according to people familiar with the matter. The Milan-based bank’s board will meet Wednesday to complete the process.

Orcel is set to finally get his chance to lead a major European bank. After years waiting behind Sergio Ermotti at UBS Group AG, he jumped in 2018 to take the CEO spot at Banco Santander SA, another lender he had a long history of advising. That move blew up in a dispute over pay, leaving Orcel sidelined for the past two years as he sued the Spanish bank. UniCredit offers a comeback.

“He knows the bank inside out,” said Iacopo Dalu, an analyst at Janus Henderson Group Plc, which manages $358 billion. “Investors are looking for someone who is almost a guardian of their capital. That would help the market feel that this isn’t an individual put there by someone who doesn’t have shareholders’ interests in mind.”

UniCredit rose as much as 2.1% in Milan trading on Wednesday and was up 0.5% as of 10 a.m. The stock jumped as much as 5.6% on Tuesday, when Bloomberg reported Orcel was likely to get the job.

“Orcel will contribute long investment banking and M&A experience, which could be useful in defining the new group strategy given the ongoing consolidation wave in the Italian market,” Mediobanca analyst Andrea Filtri said in a note Wednesday. The bank’s new CEO will have to clarify “the investment case of the stock,” he said.

Orcel started his banking career at Goldman Sachs Group Inc. before joining Merrill Lynch in 1992 as an adviser to financial institutions. While at Merrill, he helped arrange the 1998 combination of UniCredito and Credito Italiano, creating the institution that he’s about to take over.

UniCredit recently lost the crown of Italy’s biggest bank as the industry looks to deals to cut costs and allow lenders to overcome the economic obstacles of a home market that has the highest debt of any euro country after Greece. Intesa Sanpaolo SpA last year bought smaller rival UBI Banca SpA, increasing its lead in the Italian market over UniCredit.

Monte Paschi

Italy’s government, meanwhile, has been trying to unload Banca Monte dei Paschi di Siena SpA for months onto UniCredit, leading to a conflict that helped drive Mustier out of Milan. The government offered incentives from tax relief to protection from legal risks to help land a deal, but Mustier resisted, seeking a capital-neutral transaction.

“Paschi’s balance sheet has been so opaque for so long that it’s impossible to know if UniCredit will get a good deal,” said David Moss, co-head of global equities at BMO Global Asset Management, which manages 253 billion pounds ($347 billion). “It will depend on the guarantees from the government and how much the bank will be allowed to do.”

The irony that Monte Paschi could be an instant headache for Orcel isn’t lost on any number of analysts and investors, given his history with the troubled Tuscan lender, which is also the world’s oldest bank.

Orcel was involved as adviser in Monte Paschi’s acquisition of Antonveneta in 2007 for 9 billion euros ($11 billion). Critics say that was a massive overpayment, and the transaction has dogged the bank ever since. In fact, less than 10 years later, when Paschi was on the brink of a collapse and Orcel was then a UBS banker, he proposed a rescue plan that was rejected by the bank.

Monte Paschi failed in raising fresh funds from investors and was nationalized less than a year later.

“Regarding UniCredit being a possible bidder for Paschi, we hardly believe he will greenlight a deal that may penalize UniCredit’s investors at any level,” said Fabrizio Bernardi, a Milan-based analyst at Bestinver Sociedad de Valores SA.

Veteran Dealmaker

Still, it’s Orcel’s profile and his dealmaking chops that appealed to UniCredit’s directors. Orcel was supported by some of UniCredit’s foreign institutional investors and Italian shareholders, including Luxottica founder Leonardo del Vecchio and Fondazione CariVerona, the people said.

Orcel, who has a degree in economics and commerce from the University of Rome and a master’s in business administration from Insead at Fontainebleau, near Paris, was an adviser to many of Europe’s top banks at Merrill Lynch.

In 2012, he moved to UBS as co-head of the securities unit and then became its sole head a few months later. He said he wanted to create a “real investment bank, the kind that there aren’t anymore.” Current and former colleagues said employees often either love or hate Orcel, whom they described as tireless, demanding and direct.

At UBS, Orcel steered the investment bank to profitability amid a firmwide restructuring that focused on wealth management in the wake of the financial crisis. His unit swung from a loss the year Orcel arrived to a 13% return on equity in 2017, one of the highest figures in the industry, even as the division shed more than half its assets over that time.

Orcel made no secret of his desire to get a top job, and thought he had found that with Santander. He’s suing the Spanish bank for about 100 million euros, claiming it ruined his career with a last minute decision to back out of hiring him. The trial is set to start in March. A spokesman for Santander declined to comment.

“From an experience standpoint, he’s the kind of candidate we would be looking for,” said Conor Muldoon, who helps manage $45 billion at Causeway Capital Management in Los Angeles.

©2021 Bloomberg L.P.

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