The Ronaldo of Banking is about to strike Germany’s financial core

The audience fell silent as the Italian with grey hair and a sharp suit entered the packed conference in London. The Bank of America CEO Conference in Marylebone was attended by hundreds of delegates who knew this tall, perma tanned banker as the main attraction. Andrea Orcel spent 25 years in London, where she advised chief executives about some of the biggest mergers and purchases. He earned a reputation as “the Ronaldo” of banking for his lavish pay packages.

He has now become the boss of his own bank and is orchestrating a deal that will likely be the most important moment in his career. Orcel, by deploying the Anglo-Saxon practices he honed at London to the more patrician Eurozone, has created a major schism within the European Union. He exposed Germany’s weakness and tested its appetite for further financial inclusion.

Why? Many believe that the Italian bank UniCredit which he has been running since 2021 has acquired a 21% stake in Commerzbank. This is a sign of an upcoming merger. Germany is furious. Olaf Schloz branded UniCredit’s attack as an “unfriendly assault”. This serves as a reminder that Germany is no longer a manufacturing powerhouse. Some people see it as an insult to Germany’s largest economy that a bank from Italy is interested in one of Germany’s largest banks.

David Marsh, an expert in European banking who has been following the industry for many years, called Orcel’s decision a “watershed” moment for Germany, and Europe. Marsh, the chair of the banking think-tank Omfif, said that the move “adds to the spate” of economic and political worries affecting Europe’s largest economy.

Orcel’s deal-making abilities, which have already caused controversy, will be put to the test. Everybody in the City has a story to tell about this jet-set financier who is usually pictured wearing a bright, red gilet that’s typical of Davos delegates. Some see him as a villain while others view him as a hero. There are also warnings about his explosive temper, although some attribute this to his passion for work.

He’s brilliant. He is a master at anything he does. “He can lose his temper occasionally — that’s what people remember him for,” said an ex-banker. After studying at the Sapienza Business School in France and the Insead University in Rome, he briefly worked for Goldman Sachs, Boston Consulting, and Merrill Lynch before joining the company in 1992. He moved to London, where he stayed for nearly 25 years. His home was in Holland Park, the banking paradise.

He was close with Emilio Botin the late Spanish banker. At Merrill he helped him build Santander’s empire in Britain by helping to purchase Abbey National in 2004. He was credited with the unprecedented £49 billion takeover by three parties of the Dutch bank ABN Amro, which was at the time regarded as a deal of the century. But it all went wrong a year after the initial announcement. Royal Bank of Scotland, now NatWest, Belgian insurer Fortis, and Spain’s Santander purchased the bank and divided it between them. It was a disaster that brought both RBS (now NatWest) and Fortis (now Spain’s Santander) to the edge of bankruptcy. Santander only escaped disaster by a hair’s breadth, selling the part it bought to Banca Monte dei Paschi di Siena.

Orcel received a bonus of $32 million that year just as Merrill itself was being rescued from bankruptcy by Bank of America. Later, he admitted that if he knew what he knows now, a deal with RBS led by Fred ‘the Shred’ Goodwin would have been a bad idea. He took over the investment banking division of UBS in 2012 after it was bailed out. Davide Serra is a fellow Italian and runs Algebris Investments. He credits Orcel for preventing UBS’s collapse. Serra said that Orcel’s efforts to turn around UBS were a major factor in saving the bank.

Orcel was pursuing the position of group chief executive at UBS, but he quit in 2018, to become CEO at Santander. Emilio Botin’s daughter Ana Botin is Santander’s chairperson. Both sides were unhappy with his demands of a salary package exceeding €60 million. This was unacceptable to the Spanish bank. Orcel sued Santander and the court ordered that it pay Orcel €43.4million. Santander is contesting the settlement before the Spanish courts.

Orcel accepted a position in 2021 as the head of UniCredit, a bank he founded back home. Clara is from Portugal and Orcel now splits his time between Milan. He has been credited for turning around the bank, slashing 10,000 jobs in the process. However, he’s also faced criticism over his slowness to remove the bank from Russia. UniCredit says it is “orderly” reducing its presence in Russia.

Orcel is a fluent linguist in Italian, French and English, but German is the one language he hasn’t mastered. But it is this language that he hopes to leave behind as his greatest legacy. His attempt to purchase Commerzbank will be a test to see if the eurozone is truly unified.

Marco Nicolai is a Milan-based Jefferies banks analyst. He said: “If German political leaders oppose it it could set a precedence that would make it difficult for other politicians to accept cross-border deals.” This is an important moment in the future of European Integration.

The merger should theoretically improve the chances for European banks to compete with their American counterparts.

The eurozone is home to major players in banking such as Deutsche Bank and Santander, but none of them are on the same scale as those in the US. JP Morgan’s stock market value is equivalent to that of the 12 largest eurozone banks. Even if Unicredit acquired Commerzbank its stock value would only be 15 percent of JP Morgan’s.

The banking sector in Germany is fragmented, despite the international presence of Commerzbank und Deutsche. Numerous local lenders serve its famed Mittelstand, the small business sector.

Orcel’s audacity is heightened by the manner in which he went about his swoop. Unicredit bought a 4.5 percent stake in Commerzbank over the summer, below the required level. The German government then sold it 4.5 percent.

UniCredit shocked the markets last week by admitting that it had purchased another 11,5 per cent via a complex derivatives transaction. It does not actually own the shares, but it has a legal right to them. Unicredit was able to avoid the need for approval by the European Central Bank when it wanted to invest more than 10% in a bank.

What does Orcel plan to do now that he has a powerful position? Orcel presented his options at that Landmark Hotel meeting in London, last week: keep it as an asset; “come together” to form a takeover or sell it.

Orcel stated that a deal would be “good both for Germany and Europe. It will demonstrate whether we can come to an agreement and create a bank that is stronger and can support our economy and accelerate growth in our bloc”.

Commerzbank did not make a formal offer after the Friday talks. His goal remains a distant dream.