UniCredit CIB chief looks to deliver client-driven investment banking

Richard Burton

Going into 2020, UniCredit head of corporate and investment banking (CIB) Richard Burton believes the bank is starting the new decade “from a position of strength”. UniCredit, a pan-European commercial banking group, launched its Team 23 Strategic Plan for 2020 to 2023 at the end of 2019, which is centred around fully leveraging its CIB offering to deliver growth over the next four years.

Team 23 follows hot on the heels of the group’s Transform 2019 strategic plan for the 2016 to 2019 period, which focused on improving the group’s capital position, derisking its balance sheet and delivering efficiencies. For Mr Burton, the successful delivery of Transform 2019’s objectives provides a strong foundation for the coming years. “The first plan simplified the group,” he says. “The next four years are going to be about growing in an environment that will continue to be very challenging. It is going to be tough but our teams know what they need to do and what the winning formulas are for the way we approach business.”

UniCredit describes its CIB as “fully plugged in”, meaning that its resources are available to serve clients from across the banking group. Offering its product range to a broad spectrum of clients – small and medium-sized enterprises (SMEs), corporates, high-net-worth individuals and financial institutions – is key to its growth plans.

Staying client driven

A key performance indicator for CIB is delivering client-driven revenues, i.e. money earned from serving clients rather than from the performance of investments. Under the Transform 2019 strategy, CIB hit client-driven revenue of more than 70% and Mr Burton is keen to see that continue to grow. “What we offer is client focused and client driven,” he says. Mr Burton believes CIB is well placed to offer long-term value to clients too, and is seeking to expand its global transaction business, for example, with working capital solutions. 

“It is not just the one-off strategic acquisitions that might come along every two or three years. What is really important for the treasurer and chief financial officer is how they are optimising their balance sheet, how they are financing their trade, and so on. These are their daily needs,” says Mr Burton. Via CIB’s working capital advisory service, it will help clients to identify the right package of products and services to meet their day-to-day liquidity needs.

Mr Burton believes UniCredit is uniquely positioned to provide a depth of service to clients across Europe that other banks cannot replicate. “We are not trying to compete with the big global banks – they have the size and scale for flow business – but we are champions in Europe where we can go very deep and granular, and have strong and enduring relationships with companies that others cannot easily reach,” he says. The bank acted as global coordinator and bookrunner for the initial public offering (IPO) on the Italian stock exchange of Italian yacht manufacturer Sanlorenzo in December 2019. The IPO was one of a relatively small number of Italian IPOs that went ahead in 2019, and Mr Burton cites CIB’s success in delivering it as proof of the strength of its networks.

Access to capital

UniCredit is keen to assist smaller corporates access capital too. It has long been recognised that Europe’s SMEs can find it difficult to access growth capital, and in May 2019 the bank launched a patient capital initiative (the largest pool of patient growth capital in Italy, up to €2bn). The scheme is targeting about 4500 high-growth-potential SMEs in Italy and UniCredit, alongside well-known investment managers, will invest in minority stakes over a longer time period than typical private equity instruments. This will be delivered alongside strategic advisory and business development support. Mr Burton says that although the scheme is focusing on Italian companies initially, UniCredit is keen to expand it to other key markets in the future.

Increasing access to and availability of capital across Europe is something that the EU has been aiming to tackle since launching its Capital Markets Union initiative in 2015. Although some progress has been made, it is widely accepted that there is still much work to be done. In the meantime, Mr Burton believes that UniCredit can act as a “mini Capital Markets Union” for its clients. “We are one of Europe’s largest SME banks, and as such we need to be close to both the real economy and our clients in their everyday life,” he says.

Reacting to the environment

A persistent low interest rate environment is often cited as a major challenge for Europe’s economy. In his capacity as president of the European Banking Federation, UniCredit CEO Jean Pierre Mustier has spoken about how banks should avoid complaining about this and make the best of the situation. Mr Burton echoes this view. “It is important to focus on what you can control yourself. We cannot control the wider environment,” he says. “Negative rates are challenging for banks, but they are challenging for our clients too. Our priority is to help them manage their liquidity.”

Mr Burton believes that UniCredit’s Team 23 strategy has set appropriate goals for the business to work towards and that “even if we have a worse economic outlook than expected, we are confident that we have the right model in place for the future”. For him, doing the right thing for the long term is preferable to looking for short-term solutions.

An example of this longer term thinking can be found in the group’s decision in 2012 to step back from direct delivery of equities execution and research, due to a lack of scale in this area. Instead, it took a stake in broker Kepler Cheuvreux (then Kepler Capital Markets) and used it as its distribution vehicle instead. UniCredit was one of the first banks to adopt this model, which has since been taken up by others, particularly within European markets.

Although the decision was made several years before Mr Burton took up his current post, he is very supportive of it. “It was a strong and first-mover choice,” he says. “At the time it was a bold decision that raised some questions initially, but it has proven itself every year since.” He adds that it has been a win-win, providing a better offering for clients and better returns for UniCredit. 

At the group level, environmental and social governance has also become an important area for CIB’s long-term planning. This includes a strong focus on what changes it can make internally. For example, UniCredit has worked to significantly reduce plastic usage across offices and branches, as well as working towards targets for greater reliance on renewable energy and reducing operational emissions. It has also committed to stop funding thermal coal mining by 2023 and will offer no new funding for Arctic oil and gas projects. “It is really important that we look at what we’re doing ourselves, as well as the work we do with clients,” says Mr Burton.

On the capital markets side, Mr Burton is keen to highlight that UniCredit has been a leading player in green bond markets since day one. “We were one of the three arrangers for the first green bond, issued in 2007,” he says. While UniCredit will continue to be active in this space, Mr Burton is also keen to point out that its work involves a broader approach. “We have been there on a product level, and now we want to help in the much more complex strategic conversations,” he says.

UniCredit has recently created an advisory team to support clients in their transition to more climate-friendly ways of operating. The group helps clients to understand how they can achieve their strategic goals around sustainability and supports them in taking the financial steps to get there. Mr Burton stresses the importance
of the work being “measurable, targeted and real”.

Not only is this an area of personal importance to Mr Burton, he has also found it has generated enthusiastic buy-in from staff. “It has been great at a company culture level, with colleagues all working together to achieve something important,” he says. “In particular, I’ve been struck by the energy I’ve seen from younger members of the team who are very motivated by our commitment in this area.”

An inclusive culture

A supportive team culture is something that Mr Burton aims to cultivate within UniCredit’s CIB division. He believes it is a positive that much more leadership time within banks is now spent considering how teams are being led, valuing employees’ work and creating an inclusive workplace.

He is also keen to create an intellectually stimulating workplace, with opportunities for people to learn new skills at all stages of their career. “We need people with a diverse range of skills, so we try to create opportunities for people to move around within our network,” he says. “In 2019 alone we made roughly 200 transfers between CIB and other areas of the group.

“When you’re working in a team where people support each other and everyone is pulling in the same direction, it creates a better working environment for everyone. It also gives you the strength to make the decisions that you need to make.”