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Stirring Up the Banking World: Orcel's Ambitious Superbank Plan
By Gerhard Bläske, Milan
Milan's Shockwaves
Andrea Orcel, Unicredit's CEO, has sent shockwaves through the banking world. Not only has he caught everyone off guard with his entry and escalating stakes in Commerzbank, reaching 28%, but also with his surprise takeover offer for Italy's third-largest bank, BPM. And the plot thickens, with plans for a potential merger with another struggling institution, Monte dei Paschi di Siena.
If successful, Unicredit would become Italy's prime bank, focusing on the economically robust northern region and leading the Eurozone. But these dreams face daunting resistance from various factions, including management, governments, unions, and even rival banks. Yet, Orcel remains undeterred and forges ahead.
Market Speaks, Politics Listens?
The market offers a clear message: for Orcel's plan to thrive, he must adjust his BPM offer and make compromises, such as with Credit Agricole. This French bank is keen on extending their asset management collaboration (Amundi), but Orcel seeks renegotiations. Furthermore, the French and BPM have collaborative projects in consumer credit and insurance.
The Unicredit share price has bounced between €36 and €39.50. Despite reducing the target price from €47.80 to €46.10, Barclays analyst Paola Sabbione still recommends buying. J.P. Morgan has also lowered the target price — from €50 to €49 (buy), keeping the shares at "overweight." Goldman Sachs echoes the buy recommendation with a target price of €49. UBS agrees, recommending a buy with a target price of €52.
Orcel's Dynasty
Under Orcel's command, Unicredit's profits, share price, and payouts to shareholders have skyrocketed. The bank has consistently increased its profits quarter-by-quarter for 15 quarters. Since Orcel's appointment, the share price has nearly quintupled. The 20 analysts tracking the stock put forth a strong buy recommendation.
Orcel has reshaped the banking institution, delivering a sharp focus on growth via digitalization. This includes investments in Fintechs like Berlin-based Banxware. With an expense ratio of 36.6%, Unicredit ranks among Europe's top players. Staff reduction continues, but the bank also hires young employees, employing around 70,000 people, nearly 27,000 of them in Italy.
UniCredit extends its presence across 13 European countries. Orcelmasterminds expansion into growth areas like asset management, where Unicredit still lags. The collaboration with asset manager Azimut has been strengthened, with a five-year call option for the joint venture.
Italy's Banking Goliath?
UniCredit also eyes opportunities in the insurance sector. Orcel plans to terminate the life sector joint venture with partners Allianz and CNP Assurances, acquiring their shares. The partnership with Allianz in the non-life sector will continue.
Analysts consider UniCredit a wise investment, believing its current valuation is modestly undervalued, with a price-to-earnings ratio of 6.60 and a dividend yield of 6.23%. Mediobanca analyst Andrea Filtri compares the generous payouts to drug addiction: "We want it, we want more of it." The proposed acquisitions wouldn't significantly impair profitability, making the impact on UniCredit's equity ratio manageable.
Stay tuned as Orcel continues to reshape the banking world!
- Commerzbank, a German bank, faces potential changes as Orcel's increasing stake reaches 28%, with talks of a potential merger with Monte dei Paschi di Siena.
- Investors consider Unicredit, led by Andrea Orcel, a smart investment due to its modestly undervalued valuation, with a price-to-earnings ratio of 6.60 and a dividend yield of 6.23%.
- Orcel's vision for Unicredit includes focusing on the economically robust northern region, leading the Eurozone, and expanding into growth areas like asset management and insurance.
- While negotiating with Credit Agricole for extended asset management collaboration, Orcel ignores the yield on finance and investing, aiming to renegotiate terms to benefit Unicredit's business.
