2023 will be more complicated than 2022. We will still see a slowdown, with lower GDP estimates and higher inflation, but not a recession. To say it is Andrea Orcell, CEO of Unicredit, speaking at the eighth edition of the Italian CEO Conference, an annual event organized by Mediobanca which this year brings together more than 50 CEOs of listed Italian companies and more than 180 Italian and foreign investors belonging to the main investment houses.
"The most complicated year will be 2023. For this year, we already arrived in June and accumulated a certain number of results” says Orcel. For next year "we still think there will be a slowdown and not a heavy recession, even if we will have a better idea as the months go by".
Unicredit confirms Plan and guidance
Then referring to Unicredit, Orcel said that "in the scenario of an economic slowdown, without a heavy recession, we are still able to achieve the objectives of the Plan. At the moment we see no reason to change our guidance”, he added, explaining that the macro assumptions communicated with the first quarter accounts remain valid.
“This expectation does not change. The data could be slightly better than estimated at the end of the first quarter.
Compared to Russia we are covered for any eventuality
As for the relations of Unicredit with Russia, Orcel said it will be given “an update at the end of the second quarter. At the end of the first quarter we decided to get as close as possible to what we think is the worst possible scenario and we have covered 70% of the shock that we could suffer and 100% of the local subsidiary's direct exposure – he added -. We think we have been conservative and are well covered for each eventquality".
The banker also highlighted that considering the franchise excluding Russia, "in the slowdown scenario in the economy", UniCredit "can generate the value that supports distribution to shareholders".
More generally Orcel sees “one deceleration in asset management and in the investment decisions of households and businesses, while from the point of view of commissions, we confirm what we previously communicated: they will be slightly up year on year”.
Orcel added that he is not concerned about the movements of the government bond yields and the spread. “From a capital sensitivity standpoint, we're not concerned, while from a standpoint of the impact on corporate and household borrowing, we're in a benign environment. At this point we think that Europe will not follow the USA, but will follow at a slower pace”.
We will continue with the buyback: better than the M&A
Orcel also returned to talk about buyback, which he prefers over Marger and Acquisition investments, sometimes at unrealistic prices.
“Given the valuation of our stock right now buybacks are much more attractive than M&A at inflated prices,” he said. “We will comment on the second tranche of the buyback” of one billion out of a total of 2,6 billion at the end of the second quarter. "At the moment we are still following the plan and we are optimistic that we will reach the targets and then we will be able to ask for authorization to distribute the other billion".
“Having said this – he added – if in some countries, not to say all, I could have four, five or six points of market share more under the right conditions, we could build for the future and we would. We haven't been able to do that yet."
“If I had to buy a bank where all I get are branches and products with low profitability why should I do it? Branches are no longer an indicator of market share, we need to look at the market share that counts: we need to see what I'm buying from the point of view of the number of customers and what I can sell to those customers in the markets that interest us. If this is not there, the cost must be very attractive indeed. The other thing we look at – Orcel noted again – is whether the possible target for an M&A operation “has a technology that can accelerate our transformation".
Nagel (Mediobanca): central role of banks and the Pnrr for the recovery
This morning, Albert Nagel, CEO of Mediobanca, in his opening speech at the Conference underlined the role of banks and the Pnrr in the current situation.
“In Europe the banks remain the main one means of transmission of monetary policy at the service of the real economy and, to a certain extent, also of fiscal policy, as happened during the Covid-19 emergency. It is essential that banks are sound and robust, capable of maintaining credit to businesses and households. Thanks to the decisions of regulators taken during the pandemic, European banks are entering another difficult phase but with one stronger positionfrom the point of view of capital and liquidity. Italy is no exception, also thanks to the enormous de-risking policy applied in recent years. 2022 is proving to be a challenging year with rising inflation and ongoing conflict in Ukraine. The recovery plan is essential for Italy" "Central banks must play a decisive role in containing the rise in prices," concluded Nagel
