The former UBS manager is driving forward European banking consolidation. There is quiet satisfaction in Italy.
“Extremely competitive”: Italian banker Andrea Orcel.
Hollie Adams / Bloomberg
The “Cristiano Ronaldo of the financial world”, the “steel banker”, the “rainmaker”: Andrea Orcel has been given various nicknames by the media over the course of his career. A real title was added this summer: the British financial magazine “Euromoney” honored the CEO of Unicredit as Banker of the Year – in recognition of his leadership qualities and the achievements of his bank in 2023.
He felt “extremely honored and grateful,” Orcel said at the award ceremony. You can believe him every word. Being at the top, at the top, best in class – that is the currency that counts for him. A former colleague once described him in the Financial Times as “extremely competitive.” described.
Since Wednesday, all eyes have been on Orcel again. The Italian, with Unicredit, has surprisingly acquired a 9 percent stake in the German Commerzbank. The bank from Milan is preparing to take over its competitor from Frankfurt. In an interview, Orcel confirmed the rumors and added: “We are very patient.”
Savior of the UBS investment bank
Andrea Orcel was born in Rome in 1963 into a middle-class family. His father – of Sicilian origin – worked in the leasing business, his mother worked for the United Nations and, because of her French roots, was keen that Andrea first attend the Lycée Chateaubriand in the Eternal City, a prestigious French school. He studied economics at the Sapienza in Rome before moving to the Insead training school in Fontainebleau. Orcel is married and has a daughter.
Orcel also left his mark in Switzerland, at UBS. The bank was in a desolate state after the financial crisis. And the then UBS boss Sergio Ermotti had to get it back on track. To do this, he lured Orcel away from Merrill Lynch in 2012 with a signing bonus of 25 million Swiss francs and put him at the helm of the scandal-ridden investment bank as co-head. He soon became the sole head of a division that was generating billions in losses at the time and almost brought UBS to ruin.
As Ermotti’s sidekick, Orcel was primarily in demand as a turnaround specialist. Working tirelessly day and night, he reduced over half of the risky assets and cut thousands of jobs. Instead of capital-intensive trading in bonds, currencies and commodities, the investment bank slowly took on its current form, with consulting and capital market business at its core. Orcel’s clout was crucial in getting UBS back on track.
It was obvious that Ermotti had brought an alpha male into the company with Orcel: in 2013, the Italian earned over 11 million francs, more than his boss. Orcel also made no secret of his ambitions to take over Ermotti’s job one day. But that never happened. In 2018, Orcel surprisingly left Switzerland. He was offered the top job at the Spanish major bank Santander.
But that didn’t happen either. Santander President Ana Botín backed out before Orcel could take up the position. The millions in compensation that Santander would have had to pay UBS for deferred bonuses was too high. Orcel fought back: “I’m not a person who lets things go,” he said on record, and sued the Spanish major bank for 112 million euros in compensation. After a lengthy legal wrangling, a court awarded him 68 million for “moral damages and reputational damage.” Orcel had won again.
Investors’ favorite
His reputation as a tough banker who doesn’t let up was cemented. Even if those who worked with him say he has become gentler over the years. During the Santander episode, Orcel’s next opportunity opened up. He was appointed head of the Italian Unicredit – a banking group that he helped to create as an investment banker in 1998 with the merger of Credito Italiano and Unicredito.
As CEO of Unicredit, he had found the ideal job. For shareholders, he quickly made Unicredit the most successful bank in Europe. The share price has quadrupled since he took office. Unicredit shares are now valued almost as high as those of UBS. The steep rise in the share price has given Orcel the financial means to go on a shopping spree in Europe.
But first he had to clean up Unicredit. He freed the bank of bad loans, sold business units and raised billions in new capital. He also cut 13 percent of all jobs and 11,000 people had to go. “We were a restructuring story, now we are in the land of blue chips,” says Orcel.
His promise: No matter what the bank does, it must achieve a return on capital of 15 percent. That’s why investors love him. The restructuring, but also the increased interest rates, caused Unicredit’s revenues to soar. In 2023, he gave the bank’s entire revenue – over 9 billion euros – to shareholders in the form of dividends and share buybacks.
Orcel has achieved a lot on the stock market. But what he still lacks as CEO is a “transformative deal”, a mega takeover, which Ermotti already has on his resume. A complete takeover of Commerzbank would perfectly complement Orcel’s palmarès as Europe’s best dealmaker.
Tensions with Draghi
In Italy, Orcel’s economic successes and the restructuring of Unicredit have been noted (as has his princely compensation of around 10 million euros in 2023), but the banker has not yet made the big headlines in his home country. Unless there is a crisis or emergency, the financial sector in Italy has a different status than in Switzerland or England.
In 2021, however, people would have liked to see Orcel and Unicredit as saviors – as the man who would rescue the struggling Sienese institute Monte dei Paschi di Siena MPS from the mess. But for fear of legacy issues, he did not enter into a takeover deal with MPS. Italian media subsequently reported on tensions between Orcel and the then head of government, Mario Draghi. MPS is now making profits again, and the state has since sold the majority of shares it holds on the stock exchange.
Orcel had bigger things in mind. The fact that he is now taking over the German Commerzbank and could become the initiator of a wave of consolidation on the European financial market is remarkable in several respects. Firstly, because this time, albeit rather coincidentally, he is following in Mario Draghi’s footsteps. Last week, Draghi presented a widely acclaimed report on the state of the EU’s competitiveness, in which he criticized the weakness of the small-scale European capital market.
Orcel’s Commerzbank operation, on the other hand, could lead to the formation of a strong European banking group with roots in Italy and Germany that would be able to operate anywhere on the old continent – exactly what Draghi is demanding. “Orcel is following in Draghi’s footsteps,” the “Repubblica” commented on the latest developments.
On the other hand, there is satisfaction in Italy, albeit behind closed doors, that a fellow countryman is becoming an important player in Germany. “The purchase proves that the Italian credit system is capable of playing a leading role abroad and on the international stage,” says Marco Osnato, a member of the ruling Fratelli d’Italia party and head of the Finance Committee.
Compared to Germany, Italy mostly feels like the underdog. The constant admonitions from Frankfurt and Berlin and the references to Italy’s unstable financial situation, which are sometimes perceived as patronizing, are not equally well received everywhere. Against this background, the fact that an Italian institute is now investing in a bank whose president is Jens Weidmann, the former head of the Bundesbank, is not without a certain irony.
