UniCredit CEO takes aim at Banco BPM

It was reported in Reuters - 'Unwelcome in Germany, UniCredit CEO zeroes in on Italy' - Reuters, November 29, 2024 - that just days before UniCredit CEO Andrea Orcel set his sights on a takeover target in Italy, "more evidence emerged of fierce resistance to his interest in German flagship lender Commerzbank".

According to Reuters, a group of customers from Germany's corporate elite "pleaded" with Commerzbank's CEO to reject a deal, according to people involved in the meeting at the bank's Frankfurt headquarters, underscoring the depth of opposition.

"They warned Germany's second-largest bank would face the same fate as a Bavarian bank HVB, which UniCredit bought in 2005 and subsequently overhauled and scaled back.

"On Monday, Orcel switched his focus to his home market with a 10 billion euro ($10.5 billion) offer for smaller Italian rival Banco BPM, saying this deal would take precedence over any potential move for Commerzbank."

Orcel had caught the German establishment "off guard" by discreetly building a substantial stake in the German lender.

In wider conversation with Reuters journalist Stefania Spezzati, London Business School's Professor Richard Portes made the following observations:

"Andrea Orcel has been incredibly successful, he's obviously a very talented banker. If you look at UniCredit’s share price since he came in, it's up three or four-fold. That's remarkable. His predecessor, Jean-Pierre Mussier was a very sharp guy, but he didn't succeed in the kind of cost-cutting that Orcel has excelled in. "

Sending a message

"With his last move on BPM, he's sending a message to the Germans that he can wait for Commerzbank. He can do both deals. The story about domestic German opposition, this is now election time in Germany, and you expect people to talk. Commerzbank remains a weak bank."

On whether a UniCredit/BPM tie up could increase competition issues, Portes said: "What Italy needs is low-cost, internet-based competitors that force the big banks to streamline, to improve their IT which offer great benefits to consumers. Having two or three big banks competing with each other is irrelevant nowadays. What you need in Italy is competition. And it's not competition among three big banks. It's competition from below."

The knack of cost-cutting

“I think his [Orcel's] strategy is probably pretty clear. Some people have said that the BPM move is a lowball offer. The answer is that it probably is, but knowing Orcel's strategies is a lowball offer. That’s fine. He's got plenty of room to, on a challenge, bring it up some. He can lead the strategy of the integration. And then he has got to hire. I think he's demonstrated he can hire people who know how to cut costs. He can also hire people who can integrate IT systems. You've got to be willing to pay for such people. That's a different story. You can't lowball on that. There aren't that many really good people.

“Somebody who can play it the way that he did with Santander, he is clearly not somebody who's modest. No. He is a tough guy, and succeeded in making Santander backtrack and then pay him off very, very handsomely.”