UniCredit readies itself for an uncertain future
Italian bank's chairman Pier Carlo Padoan on takeovers, bad loans and the need to have more women in the workforce.
Pier Carlo Padoan
Former finance minister Pier Carlo Padoan was named chairman of Italy’s UniCredit in October 2020. The bank has had a particularly tumultuous time since then.
In November, after clashing with the board over strategy, chief executive Jean Pier Mustier announced he would step down in April. A suggested purchase of troubled Monte dei Paschi di Siena (MPS), now in the government’s hands, was flagged as one of the contentious points that soured relations, although Mr Mustier said at the time he was open to a deal if it was “cost neutral for UniCredit”. He will be replaced by Andrea Orcel, an Italian national and former head of investment banking at UBS.
Mr Padoan declined to comment on the record about whose interests should be considered in a possible deal — shareholders’ or, more widely, stakeholders’ — and whether the latter group would include the Italian government. He shared his views with The Banker, however, on UniCredit’s potential national expansion, bad loans and gender quotas.
Q: Italian banking is still very fragmented. Aside from MPS, would UniCredit consider other deals?
A: I agree that in Italy there are too many small banks. A process of orderly consolidation is important. There is space in Italy, and elsewhere, for further mergers. Nothing is on the table for UniCredit at the moment. We’ll reconsider this once Mr Orcel has joined. I can confirm that all possible options of non-organic growth will be considered in the interest of stakeholders and of shareholders.
Q: Despite a worse-than-expected fourth quarter loss, UniCredit closed 2020 with a €1.3bn annual profit. How does the market look in 2021?
A: Italian banks are much better now than they were a few years ago. UniCredit’s capital position is very solid. We still don’t know if we’re coming out of the crisis and at what speed, or if there’ll be a cliff edge once emergency measures to prop up the economy stop.
In Italy there are too many small banks. A process of orderly consolidation is important. There is space for further mergers.
At UniCredit, we’re getting ready to deal with this potential cliff edge, to ensure sufficient levels of liquidity. I trust this will be possible, not just for UniCredit but for others too. It’s important that the Italian government’s recovery plan is implemented in the speediest and most efficient way, because this would help banks and businesses respond to those measures in an optimal way. It’s important that the private sector and the public sector work to support each other. Part of the recovery fund is meant to go towards adapting to a new economic growth model. I think that having Mario Draghi at the head of the government is a guarantee that this will happen.
In Italy there are too many small banks. A process of orderly consolidation is important. There is space for further mergers.
Q: Are you concerned about non-performing loans (NPLs)?
A: Italy has greatly improved [its NPL situation] in the past few years. The introduction of GACS [Italy’s NPL securitisation programme] has helped create a market for NPLs. Hard economic conditions are likely to generate more bad loans, but banks’ capital positions are much stronger than in the past and there is an NPL market that hopefully will help deal with worsening conditions.
Q: How has Covid-19 changed banking in Italy?
A: Covid is a symmetric crisis with asymmetric responses: they change country by country. In this context, banks play an important ‘allocative’ role. Capital has to go where there’s not only more growth potential but also more sustainability. Banks not only have an intermediary role, but are now very important first-line actors in allocating capital in a new context.
Q: UniCredit’s board reshuffle has improved gender balance, with six women among its 13 members. Would this have happened without Italy’s gender quotas pushing in that direction?
A: I helped examine prospective board members and met many female candidates of very high calibre. On my side, I didn’t push to have a balanced board because of the quotas, but because of the availability of good candidates.
[Italy’s temporary quota legislation, introduced in 2012, requested boards of listed companies and government-controlled organisations to ensure a minimum 20% representation of the minority gender in the first board appointments following the introduction of the law; and of 33% in the next two rounds. It was subsequently modified to capture the following three board renewals at a higher (40%) ratio.]
Quotas undoubtedly help, but I think the real answer has to be cultural. Women’s contribution to the economy is below potential and so there has to be a cultural change among those making hiring decisions.
