Taking over at UniCredit in 2021 as the bank emerged from years of restructuring, CEO Andrea Orcel has focused on maximising profits in relation to capital, so as to be able to reward investors and drive the share price higher.
This has not been an easy gig for Orcel. Nor should the scale of his job be under-estimated. There are just 30 so-called Global Systemically Important Banks. G-SIBs are determined on four main criteria: size, cross-jurisdiction activity, complexity, and substitutability. Of the 30, 13 banks are headquartered in Europe. Only one, UniCredit, is headquartered in Italy. Two years on from his appointment, Orcel is on a roll.
UniCredit has generated €9.9bn in capital in the first three quarters of the current fiscal. And now UniCredit has launched a new share buyback for up to €2.5bn.
Orcel argues that UniCredit shares remain undervalued and has successfully persuaded the European Central Bank that the bank can bring forward to 2023 the €2.5bn buyback, relating to 2023 earnings.
Orcel plots Alpha deal
And now Orcel is on M&A manoeuvres, with plans to acquire a 9% stake in Alpha Bank and take a majority stake in its Romanian unit. This is significant for two reasons. It is Orcel’s first deal since becoming CEO. And it marks the first international investment in a Greek bank since the financial crisis hammered the Greek banking sector.
The deal itself may only be worth around €270m. But it is a significant one for UniCredit. Orcel has been under pressure to do a deal such as this. And it does allow the Greek government to claim that it represents a milestone for its banking sector recovery.
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Orcel may well be justified in arguing that UniCredit shares remain undervalued. But for the year to date, the direction of travel marks out UniCredit in a league of its own for share price performance.
Bank shares YTD: winners and losers
A glance at the share price performance of the world’s largest banks by market cap for the year to date, brings out a number of notable share price falls. For example, Bank of America is down by 20%, Barclays by 19%, HDFC -17%, Toronto Dominion by 12% and Goldman Sachs by 11%.
Bank share price gains for the year to date include Chinese lenders in positive territory: ABC +26%, Bank of China +25% and ICBC +11%. In Europe, Santander +22%, HSBC +12% and Intesa +19%. And UniCredit? Up by 76% for the year to date.