Jean Pierre Mustier’s achievement in stabilizing UniCredit during his first year as chief executive was all the more impressive because he did so even while preserving its status as a pan-European commercial bank.
Today it remains the only bank with a top-tier operation in more than one big European economy, holding on to HVB – the German bank UniCredit purchased in the mid 2000s under then-CEO Alessandro Profumo.
When Mustier arrived as chief of Italy’s biggest bank in 2016, don’t forget, there were voices saying it should sell HVB. That would have been easier said than done, though. And keeping it has come with large costs, especially for UniCredit’s domestic business.
UniCredit’s presence in its home market leaves much to be desired – it has plenty of room to grow in the country’s most attractive regions – yet Mustier has repeatedly stepped back from M&A with lenders in Italy’s north.
Moreover, aside from cutting good businesses in Turkey and Poland, he has sold Italy-focused asset management arm Pioneer and the Italian online broker Finecobank, which could otherwise have played into Italy’s thriving wealth management market.
Mustier’s fluent arguments for selling these assets and refusing to do M&A in Italy now look less and less convincing.
Contrary course
Rival Intesa Sanpaolo has outperformed UniCredit and other Italian banks – and most of the banks across Europe too. That is mainly thanks to Intesa taking the opposite course: holding onto its domestic-focused product factories like asset management and cherry-picking Italian acquisitions.
UniCredit’s basic problem is not Mustier, it is the original flaw in Profumo’s attempt to build a pan-European commercial operation. That has meant that the bank has been unable to invest properly in either country.
If Europe had a properly functioning single market for European banking, UniCredit’s spread of resources would be of less importance. But two sub-scale country operations don’t make a competitive continental one in Europe.
Mustier and many like him still believe in pan-European banks, presumably because they come from a background in investment banking, where it is far easier to compete on across borders.
But UniCredit and HVB are much more than that, and merging banks in Europe is a bit like integrating rail companies. While the odd high-speed link may work well, each national company is far too entrenched in domestic infrastructure and politics to allow anything broader.
Now, in an attempt to get around Italian sovereign risk, UniCredit is considering hiving off its essentially German international bank into a different legal structure from its Italian one.
Perhaps, in time, this will help UniCredit or a future merger partner, making this international arm into a bank with even greater continental spread.
The alternative, though, is that this signals the beginning of the end of UniCredit’s pan-European project – eventually leading, in effect, to a long-delayed sale of HVB.
