Andrea Orcel’s legal victory against Banco Santander over his aborted appointment as chief executive three years ago may be less important to the Italian banker than to Santander executive chairman Ana Botín.
After a long-running legal battle, a court has ordered Santander to pay Orcel €67.8 million. It said the bank had unilaterally broken what it deemed a binding contract. The payment therefore covers payments due under that contract, plus interest, as well as €10 million in damages.
Although the decision is subject to appeal, it goes without saying that this tops a good week for Orcel. On Thursday, his first investor day as CEO of UniCredit triggered a rise in the Italian bank’s share price of more than 10%.
Orcel can put that performance partly down to good timing, as UniCredit’s capital – largely thanks to assets sales by his predecessor Jean Pierre Mustier – allows a big step up in shareholder distributions, of as much as 65% of market capitalization.
Orcel is already extremely wealth, so the court ruling will also be relevant in terms of the perceived reputational hit.
Pressure
Beyond the financial cost to Santander, the ruling could also ramp up the pressure on Botín. It raises doubt over the executive chairman’s judgement in this matter – and perhaps, by extension, could undermine confidence in her management and oversight of the bank more generally.
The climb down over Orcel’s appointment inevitably left Santander in a state of flux, partly because José Antonio Álvarez remained as chief executive – even though he had been due to hold onto a very senior position in the group after Orcel’s arrival.
There are business-strategy considerations as well. Orcel was to join the Spanish lender at a time when the UK and US businesses were in deep trouble. Those problems peaked in 2020, when a goodwill writedown on the UK helped tip the group into an annual loss.
Santander has since been saved by cost cuts, by government spending, and above all by the extraordinary strengths of the UK housing market and US used-car market (it owns the biggest US sub-prime auto lender). Obviously, these performances may not be sustainable.
Meanwhile, arch-rival BBVA has realised a €10 billion windfall from selling its US business to PNC. That’s put to bed concerns about BBVA’s capital ratio. Such a resolution has not been achieved over Santander’s capital, despite recent regulatory tailwinds.
Spanish drift
Even at BBVA, though, there’s been a bit of a sense of drift – if not lack of leadership – after the departure of former executive chairman Francisco González in late 2018 and his replacement by Carlos Torres Vila.
BBVA recently upped its stake in its Turkish bank Garanti at a risky time for Turkey after ending short-lived discussions on acquiring Banco Sabadell a year ago. There remain questions about where it will redeploy gains of the US sale – perhaps because of a dearth of good opportunity, partly explaining why Santander has hesitated to do similar sales.
Clearly, managing a European bank is much harder than it used to be.
Nevertheless, it is hard not to wonder if the executive-chairman model in Spain isn’t partly to blame for the lingering sense of strategic uncertainty at these two lenders. It could also be behind their somewhat confusing response to who is chief executive and how much power that person has.
There have long been rumours that supervisors at the European Central Bank are uncomfortable with the governance model in Spain. If true, that would have influenced Botín, Torres Vila, and their underlying CEOs.
Botín’s name is indelibly linked to Santander – and will always remain so. But at some point, she and her family must take a reduced role at the top. Perhaps that process is already in train. The next stage, logically, is to decide who will replace Álvarez, and when.
