UniCredit CEO Faces Board Pressure Amid M&A Strategy Discussions

UniCredit's M&A Strategy and Board Oversight

By Valentina Za, Elvira Pollina and Giuseppe Fonte

Current Status of M&A Activities

MILAN (Reuters) -UniCredit CEO Andrea Orcel faces persistent requests from its board for detailed, frequent updates on his dealmaking strategy, four people with knowledge of the matter said.

Board's Role and Expectations

The Italian bank has invested in several rival financial institutions over the past year, but not yet landed any deals.

Future Opportunities and Challenges

Amid debate over the extent of Orcel's remit on mergers and acquisitions, one suggestion that has been floated internally is to appoint a general manager, the four sources told Reuters.

UniCredit abolished the GM role in 2019, although it named one for an interim period between CEOs in 2021. 

Orcel, meanwhile, has complained to board directors tasked with management oversight that their frequent requests for documentation and briefings put a strain on his time and that of his internal M&A team.

UniCredit said in response to a request for comment that its board stood by the decision taken in 2021, when Orcel arrived, to approve delegated powers over M&A to the CEO. 

That widened the range of dealmaking decisions that Orcel, a veteran rainmaker who advised on Europe's biggest bank mergers in recent decades, could take without prior board approval. 

"The CEO and the board meet regularly and discuss all aspects of the UniCredit strategy, including any M&A activity," Chairman Pier Carlo Padoan told Reuters.

"These discussions are lengthy and fulsome, with the necessary depth that would be expected from a company of our size dealing with issues of such significance," he said. 

"The hiring of a General Manager has never been discussed and is not felt needed," Padoan added.

NOT ACTIVELY WORKING ON ANY M&A DEAL

UniCredit's board earlier this year increased scrutiny of Orcel's complex M&A strategy, seeking more visibility on future moves, sources told Reuters in May.

At the time, Padoan said the board was fully informed and backed the group's growth path and management decisions.

Since then, a hostile bid for Banco BPM collapsed, and UniCredit's Commerzbank takeover ambitions stalled after its near 30% stake triggered a backlash in Germany.

Orcel said on Wednesday that UniCredit was not actively working on any deal but it could seize opportunities.

He also said UniCredit had used hedging to cut below 2% the net exposure to Generali, Italy's biggest insurer, an investment UniCredit has described as financial and temporary.

Higher interest rates, cost cuts and large investor payouts have helped Orcel drive an eight-fold increase in UniCredit's share price since his arrival.

While this has given him a strong currency to use in any deals paid for in shares, he has set a high bar as Italy's banking sector consolidates, with Monte dei Paschi's acquisition of Mediobanca closing last month. 

(Reporting by Valentina Za and Elvira Pollina in Milan; Giuseppe Fonte in Rome; Editing by Giselda Vagnoni, Gavin Jones and Alexander Smith)