Orcel: The Dealmaker Aiming to Redefine Europe’s Banking Landscape By Reuters

By Valentina Za and Stefania Spezzati

Milan/London – When Andrea Orcel assumed leadership of the Italian bank UniCredit in 2021, the seasoned M&A advisor resolved not to fall into the trap many CEOs encounter: succumbing to the pressure to pursue high-profile deals.

Amidst this backdrop, he seized an extraordinary opportunity to explore a rare cross-border banking merger in Europe, something many considered nearly impossible. Recently, he took bold steps by discreetly acquiring a stake in Commerzbank, Germany’s second-largest publicly traded bank, prompting discussions about a potential merger.

This merger could create a significant pan-European banking institution, a development that regulators have long advocated to bolster competition against powerful Wall Street firms; however, it has met with resistance from politicians.

"It’s a clever strategy, it’s daring, and he is resolute. He doesn’t take rejection lightly," remarked Filippo Alloatti, head of financials credit at Federated Hermes, who is also an investor in both banks.

Under Orcel’s leadership, UniCredit’s share price has surged more than fourfold, reflecting its more robust profitability compared to its German counterpart, despite Italy’s higher debt costs.

"The strategic question for UniCredit’s future has been addressed," Alloatti stated.

Orcel’s plan, however, has drawn criticism from German Chancellor Olaf Scholz, who described it as an "unfriendly attack," and concerns have arisen from Commerzbank’s board members and employees about potential job losses.

Successfully orchestrating a cross-border merger of this scale would allow Orcel a second chance to showcase his capability to navigate complex banking transactions. He was previously involved in the controversial acquisition and subsequent breakup of Dutch ABN Amro by the Royal Bank of Scotland, a notable failure during the global financial crisis.

Currently, Orcel has not brought in external advisors as formal merger negotiations with Commerzbank have yet to start. The 21% stake UniCredit has secured through shares and derivatives is presently regarded as a mere financial investment, as Orcel commented in a recent banking conference.

The 61-year-old CEO has indicated that he would abandon the merger pursuit if certain conditions are not met: "We are unwavering in our discipline," he said.

Nonetheless, early indications suggest he is eager to advance. Sources suggest that the initial backlash following UniCredit’s announcement of its 9% stake in Commerzbank led to a shift in strategy. After the German government signaled it would not sell further shares of Commerzbank, UniCredit increased its stake using derivatives. The European Central Bank must approve any significant ownership above 10% in a bank.

Orcel’s leadership style is characterized as restless and demanding, contributing to a high turnover among top executives at UniCredit, contrasting sharply with the stable leadership seen at its larger competitor, Intesa Sanpaolo.

During his tenure at UBS, Orcel became impatient, ultimately leaving in 2018 after his bid to become Santander’s CEO was rescinded, resulting in a public legal dispute that awarded him millions.

Insiders at UniCredit note that Orcel is intensely private regarding his strategic decisions and the intelligence he collects, a habit formed during his investment banking career, where he would withhold details from his employer. Upon joining UniCredit, he surprised colleagues by opting to share only digital presentations during meetings for confidentiality.

Unlike some of his peers, Orcel eschews political networking. An eyewitness reported that at a recent event in Rome, he turned away from greeting the Italian Prime Minister when faced with a long queue.

Orcel has consistently demonstrated a willingness to challenge authority. He notably abandoned a deal to acquire the troubled state-owned lender Monte dei Paschi in 2021. More recently, UniCredit contested the European Central Bank’s directive to reduce its exposure in Russia.

Presently, Commerzbank’s new CEO Bettina Orlopp has vowed to maintain the bank’s independence, and trade unions are poised to oppose any takeover efforts. A German election scheduled for 2025 could strengthen resistance, even though the government, which owns a 12% stake in Commerzbank, lacks immediate means to thwart Orcel’s plans.

Those familiar with Orcel suggest he is determined to leave a lasting legacy with this venture. "This transaction could represent the most significant cross-border merger and acquisition in Europe to date," asserted Luca Evangelisti, investment manager and head of credit research at a leading asset management firm.