"We are halfway there, but the signs of recovery are all there and we are convinced that we will be able to bring Unicredit back to pre-crisis profitability levels". In his first interview as general manager of Unicredit, Roberto Nicastro explains the future of the large bank in Piazza Cordusio: "We are a real life bank" at the service of banks and families, leaders in Europe but with our heart in Italy.
FIRST ONLINE – Mr. Nicastro, in the aftermath of the change in management and the new reorganization of the bank, UniCredit presents a result for the first quarter of 2011 which is the best since the beginning of the 2008 crisis. What made the recovery possible and how Do you plan to consolidate the results by steadily recovering profitability?
NICASTRO – We have acted and will continue to act on the three crucial items of a bank: revenues, costs and capital. In terms of revenues, there is an evident recovery led by growing countries, such as Germany, and by the rebound in investment banking, but we are starting to see a recovery in revenues also in Italy, which still represents half of our business. I like to point out the excellent performance of Fineco, which in the first quarter of 2011 grew by 15 new customers, giving more and more life to our multi-channel system. By now, one customer out of three of our group in Italy is an online customer.
FIRST ONLINE – What about costs and capital?
NICASTRO – In terms of costs, the most interesting change in the first quarter is the general decline in the cost of risk, all businesses and divisions show a good trend. In Italy, in particular, the dynamics of substandard and non-performing loans slowed down, especially on mortgages and very small businesses. To all this is associated, as per the agreement with the unions, the reduction of a thousand units in the group's workforce in Italy. As for capital, in the first quarter of the year we strengthened our Core tier 49 by 1 basis points, which is equivalent to 2,5 billion euro of self-financing.
FIRST ONLINE – Some time ago, however, UniCredit said that it earns little in Italy and that Eastern Europe continues to give satisfaction: does this imply that the center of gravity will move more and more there?
NICASTRO – No, Italy remains the heart of UniCredit and not just because almost half of the business is done here. In the East which today absorbs about 20% of the capital and is the area of greatest growth for the group, however we can grow further in the coming years.
FIRST ONLINE – Also through acquisitions?
NICASTRO – In general we focus on internal growth, but nothing can ever be ruled out if interesting opportunities arise to complete the goal. Right now we plan to open 900 new branches in Eastern European countries, which will add to the approximately 4 we already have in the area. However, we must increasingly get used to reasoning in an articulated way because Eastern Europe is an area where the GDP in 2011 is expected to grow by almost 4%, albeit at different speeds.
FIRST ONLINE – Who is giving you the most satisfaction?
NICASTRO – Right now especially Poland and Turkey, which are doing great, then there's Russia which is growing while countries like Romania and Bulgaria are struggling. Ukraine and Kazakhstan are struggling even if we are registering positive signs.
FIRST ONLINE – In other words, does the European bank model remain UniCredit's compass even in the new direction?
NICASTRO – Absolutely yes, it has never been in question. We are the leading banking group in Eastern Europe and have a market share that is almost double that of our leading competitor. And how much it counts for Italian companies to have a friendly bank that accompanies them both when they go to sell abroad and when they start up new plants abroad are the numbers to tell. In three years we have supported 15 Italian companies in Eastern Europe, which from an area of relocation has become above all a large market, "nearby China" where over 70% of new Italian exports in recent years have gone .
FIRST ONLINE – With a constantly low economic growth rate and a network of branches as extensive as yours, how do you plan to increase profitability in Italy as well?
NICASTRO – Acting increasingly better both on costs and on revenues. In terms of costs, the changes in the model of use of the bank by customers are already tangible: the use of home banking and ATMs is growing and attendance at the counter is decreasing. Here too the numbers prove it: in 2 years the weight of online transactions made by our customers (also on the basis of our work) has risen from 40 to 65% and this means being able to cut operating costs for the bank. Consequently, by lowering the use of the counter, the average size of our counters will also decrease. Then we need to increase revenue.
FIRST ONLINE – How?
NICASTRO – First of all we aim to strengthen our quality and our ability to cross-sell services to businesses, thanks above all to the reduction in response times to customers. As you can see, in my office I keep a constantly updated scoreboard behind me on our response times divided by geographical area and by company category.
FIRST ONLINE – What are your goals and where are you?
NICASTRO – We want to respond in 5 days to micro-enterprises, 15 to medium-sized enterprises and 20 to large enterprises. For micro-enterprises we are already almost at full target. For medium-sized and larger ones, times have clearly improved compared to 2010, but we still have some way to go. We can do better but the quality and volume of loans remain decisive for increasing revenues. It is also important that in the first quarter of 2011 our loans to businesses grew by 2 percent. Also from this point of view it was the best quarter since the beginning of 2008.
FIRST ONLINE – After the post-Profumo turnaround, the top management of UniCredit claimed to be a system bank and not just a market bank: a business model of this type can increase turnover but does it increase profits or risks more?
NICASTRO – Our role is to support development and we have always strived to do so by seeking a balance between the 4 stakeholders: shareholders, employees, customers and territories. Our slogan in the 22 countries "real life banking" means precisely this the bank of real things, which strives to respond concretely to the real needs of our stakeholders. A clear positioning also as a response to the crisis which, as we know, has raised a thousand questions about the role of banks in the economic system.
FIRST ONLINE – UniCredit is deeply rooted in Italy and in Eastern Europe but also has a good presence in Germany which is growing five times as much as our country: what can a bank like UniCredit do to better support and in turn profit from the competitiveness of our businesses, dimensional growth and internationalisation?
NICASTRO – To grow more, Italy needs to leverage both domestic and foreign demand. And UniCredit can lend a big hand. On the internal demand front, by supporting businesses, without losing sight of creditworthiness, but evaluating them not only on the basis of financial statements but also on the quality of projects, and also by supporting new infrastructures which are so badly needed, naturally where manage to overcome the many vetoes and local micro-interests, which unfortunately in our country often end up blocking planning. We have a great opportunity today with respect to foreign demand. Hundreds of millions of new wealthy consumers are clearly growing on international markets, the demand for well-being and quality of life, the satisfaction of which is clearly in line with the Italian way of life, Made in Italy and our tourist offer . Exports and incoming tourism can contribute to Italy a tangible annual delta on the GDP growth rate as well as being the trigger for a relaunch of domestic demand just as has happened in Germany in the last 12 months, and support Italian companies who go abroad we see it as our goal and natural vocation.
FIRST ONLINE – Explain with some examples.
NICASTRO – Here it is: in one year the Chinese of the middle and upper classes have increased their consumption of quality wines by 20%, but they have mainly chosen Australian and French wines rather than Italian ones. Having the product is not enough, you also need to know how to sell it and the commercial network is decisive. Well UniCredit is ready to do its part, also with risk capital, to promote the internationalization and dimensional growth of Italian companies especially in areas with a high rate of development. And it is ready to support supply chains, networks and consortia between companies. Another example, this time positive, comes from the Prosecco Consortium – our interlocutor for years – which has managed to relaunch a quality brand by positioning it in the best Japanese restaurants.
FIRST ONLINE – How can the new reorganization of UniCredit help the propensity to support the Italy spa mission?
NICASTRO – With greater proximity to the territory. Downstream we are stabilizing branch managers and managers who will therefore no longer undergo continuous rotations. We are investing more and more in the export assistance training of our men. A few months ago we launched Eastgate, a project that we are taking throughout Italy focused on the large neighboring markets (Russia, Poland, Turkey and Romania) and which affects thousands of our entrepreneurs who are moving towards opening new markets. And our 7 macro-territory managers are activating several local export promotion initiatives. Among other things, each of them is adopting one of the new supply chains being established to which we hope to contribute by enhancing the rating in the "plus" that being together in a supply chain gives to each entrepreneur.
FIRST ONLINE – Doctor Nicastro, does the presence of UniCredit in a country like Germany teach us anything?
NICASTRO – He does teach. It teaches how to combine quality and dimension in doing business. And to grasp the ideas of a country that is emerging from the crisis. Some time ago we organized a meeting of 800 branch managers in Nuremberg and the spirit of our German colleagues was very high, the likes of which hasn't been seen for years. Their sense of belonging to Unicredit has also greatly improved thanks to the fact that everyone has acknowledged that Hypovereinsbank-Unicredit in Germany has handled the crisis very well. Corporate pride and the sense of belonging to a large European bank like UniCredit is our extra weapon.
FIRST ONLINE – There's a wonderful commercial that you just launched and which says that life is made in cycles, some go down and some go up: after the Unicredit crisis, where is it?
NICASTRO – We're halfway there but we're working to go back up with the conviction that we can do it. Before the crisis Unicredit made 6-7 billion profits a year, a necessary profitability compared to the group's capital endowment, in 2009 we made €1.702 million of profits and in 2010 we produced 1.323 million profits. In this first quarter of 2011, 800 million. The rhythms of growth have resumed. There's still a long way to go to recover, but we'll make it.
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