UniCredit’s Andrea Orcel: Bold Moves in European Banking

By Valentina Za and Stefania Spezzati

MILAN/LONDON (Reuters) – Upon taking the top job at Italian bank UniCredit in 2021, Andrea Orcel, a veteran M&A adviser, vowed not to repeat the mistakes many CEOs make: cave in to pressure to do deals.

The opportunity to pursue a rare cross-border European banking marriage, a combination deemed near-impossible by friends and foes alike, prompted him to go all in.

Orcel riled the German establishment this month by stealthily buying a chunk of Commerzbank (ETR:CBKG) and pressing for a tie-up with Germany’s second-biggest publicly traded bank.

A merger would create a significant pan-European bank, which regulators have long encouraged to better compete with Wall Street giants, though politicians have often resisted.

“It’s shrewd, it’s bold, and he’s determined. He doesn’t take no for an answer,” said Filippo Alloatti, head of financials credit at fund manager Federated Hermes (NYSE:FHI), an investor in both UniCredit and Commerzbank.

In preparation for a deal, Orcel has overseen a more than four-fold increase in UniCredit’s share price. UniCredit is significantly more profitable than the German rival it has long coveted, despite being affected by higher debt costs in Italy.

“There remained a big strategic question: What is UniCredit’s future going to be?” Alloatti said. “Now we have an answer.”

Orcel’s plan has faced criticism from German Chancellor Olaf Scholz as an “unfriendly attack,” along with concerns from the bank’s board members and employees about potential job losses.

Securing a cross-border European merger significant enough to reshape the banking landscape would offer him a chance to demonstrate that big, complex banking deals can work — a notion challenged by Orcel’s past with the Royal Bank of Scotland (NYSE:RBS_old_old) in the disastrous acquisition and breakup of Dutch ABN Amro during the global financial crisis.

Orcel has yet to hire an external adviser, as formal merger talks with Commerzbank are not underway. For now, the 21% stake he holds in Commerzbank through shares and derivatives is a financial investment, Orcel noted at a banking conference this week.

The 61-year-old stressed his discipline, stating he would walk away from a potential deal if he could not have it his way: “Do not underestimate how disciplined we are,” he told the event.

His initial moves signal a desire to proceed. A source close to the bank reported that backlash from UniCredit’s initial 9% stake in Commerzbank on September 11 prompted a tactical shift in strategy.

After Germany’s government indicated it wouldn’t sell more Commerzbank shares, UniCredit built a larger stake using derivatives. The European Central Bank, as the chief regulator, needs to approve ownership of over 10% of a bank’s stock.

UniCredit declined to comment for this article.

ROUTE TO THE TOP

Orcel’s current and former colleagues describe him as restless and demanding, which has contributed to a high turnover of top managers and division heads at UniCredit, contrasting with the steady senior leadership of its larger rival, Intesa Sanpaolo (OTC:ISNPY).

During his time as head of UBS’ investment bank, he became impatient in trying to become a CEO and left in 2018 for a potential role with Santander (BME:SAN) that fell through over a pay dispute. Orcel sought damages after this setback and was awarded millions following a public court battle.

Insiders at UniCredit suggest Orcel is fiercely private about his decision-making and the intelligence he gathers, having developed this habit as an investment banker.

When he began at UniCredit, a director noted surprise that he would not distribute hard copies of presentations in meetings, preferring to project slides on his computer to maintain confidentiality.

Unlike some of his peers, he consciously avoids courting political connections. Recently, Orcel turned away after encountering a queue to greet Italian Prime Minister Giorgia Meloni at an event in Rome.

He has repeatedly shown he is willing to upset or challenge those in power, including when he abandoned a deal to buy troubled state-owned Monte dei Paschi in 2021. More recently, he opposed the European Central Bank’s request for UniCredit to reduce its business interests in Russia.

In his latest challenge, Commerzbank’s incoming CEO Bettina Orlopp has vowed to keep the bank independent, with trade unions opposing any takeover. A German election in 2025 may complicate matters, even though the government, holding 12% of Commerzbank, lacks clear options to prevent Orcel.

One long-time acquaintance of Orcel claimed he has “backed himself into a corner” in negotiating a deal with Commerzbank amid significant opposition, but noted his keen sense of legacy building.

“This transaction would really be the most important cross-border M&A that we’ve seen in Europe,” said Luca Evangelisti, investment manager and head of credit research at Jupiter Asset Management.