Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome back everyone. Now you to Credits chief executive wants
Speaker 2: to decide by.
Speaker 3: The end of the year this year whether to make.
Speaker 2: A takeover offer for Commerce Bank, pending the new German
Speaker 2: government's willingness to allow the deal. Now this comes as
Speaker 2: the Italian lender reported record profits for the fourth quarter. Well,
Speaker 2: Andre el Child, the chief executive of UniCredit, now joins
Speaker 2: us and as always, thank you so much for giving
Speaker 2: us a little bit of your very busy schedule.
Speaker 3: Now, you had some very good earnings.
Speaker 2: When you look at the levers of what rates are
Speaker 2: doing and the I guess underlying nervousness in the global economy,
Speaker 2: what do you have to pull on to make sure
Speaker 2: that you're on target.
Speaker 4: Well, friend Sine, I would say that we have waited
Speaker 4: for this moment for the last four years. We crown
Speaker 4: sixteen quarters of profitable girls, are well prepared and we've
Speaker 4: laid the foundation for the next twelve And if you
Speaker 4: look at our messaging, not only did we reach record
Speaker 4: results of nine point seven billion, but we absorbed more
Speaker 4: than one point three billion on extrang recharges and reinforced fervor.
Speaker 4: Our provisions and our and kept impact our overlays. So
Speaker 4: for us, this was the start of the next twelve
Speaker 4: quarters were twelve year the twelve quarters where we would
Speaker 4: be more focused on gross and we would be in
Speaker 4: a position to upset the normalization of rates. So we
Speaker 4: said that this moment was going to come. As we
Speaker 4: are today, I think we have one of the very
Speaker 4: few banks that we'll be able to keep cost flat
Speaker 4: in the next three years, that will be able to
Speaker 4: keep cost of risk flat in the next three years,
Speaker 4: and that has built factories to such an extent that
Speaker 4: our fee income will be able to upset initially most
Speaker 4: increasingly more than proportionally the compression of NII coming from race.
Speaker 2: So whatever happens, that will be under control. And then
Speaker 2: you have all the M and A that you're possibly
Speaker 2: looking at.
Speaker 4: Well, you can never see whatever happens, but I think
Speaker 4: we're very, very confident on what we're going to deliver.
Speaker 4: I think this year is not only for US a
Speaker 4: record in terms of net profit, profitability and distribution at
Speaker 4: nine billion, it's also the start of an xt three
Speaker 4: years where we want to first match and then increasingly
Speaker 4: beat that.
Speaker 2: Andre talk to me a little bit about generally I
Speaker 2: mean there was a bit of a surprise that you're
Speaker 2: above five percent. Can you break down the numbers in
Speaker 2: terms of what you have for credit and what you're
Speaker 2: holding on behalf of clients.
Speaker 4: Well, let's say that the investment in generally is for us,
Speaker 4: as I have said, completely financials. We have no intention
Speaker 4: to buy or move strategically on generally. They have been
Speaker 4: a partners of ours for a long time. We distribute
Speaker 4: products in a number of markets. We might be distributing
Speaker 4: some of their asset management and it was the right
Speaker 4: thing to do when we built it up. It was leaked.
Speaker 4: When it was leaked, we said that our client had
Speaker 4: about point six percent. We were at about four point seven.
Speaker 4: Now we are just over five. Honestly, I don't think
Speaker 4: it's very significant.
Speaker 2: I mean, there's quite a lot of people in Italy
Speaker 2: that's saying it also gives you leverage to negotiate with
Speaker 2: the government or the parties into what you're trying to do.
Speaker 3: But with Banko BPM, is there any truth.
Speaker 2: In that that it's a good investment but also you
Speaker 2: know it gives you an advantage.
Speaker 4: Look, it's a good investment and we obviously by having
Speaker 4: mistakes we're a party to talk to. I wouldn't go
Speaker 4: as far as putting it as leverage or looking at
Speaker 4: a theory of the coordinated approach on BPM.
Speaker 2: So it's nothing more than actually, you know, you find
Speaker 2: it a good investment over timing.
Speaker 4: It is a good investment that has returned well. We
Speaker 4: built it over several months and we're sitting on a
Speaker 4: good capital gain, which is partially a hedge. So for us,
Speaker 4: it's a good thing for the bank.
Speaker 2: Andrew talk to me also about commerce banks. We had
Speaker 2: a lengthy conversation also and Davos. It seems that German
Speaker 2: officials are doubling down on not wanting to sell you
Speaker 2: the bank. Frankly, even if there's a change of government
Speaker 2: come February twenty third, do you see the tone changing
Speaker 2: at all.
Speaker 4: Well, I don't know. From our standpoint. We were invited.
Speaker 4: We did what we said we would do. Because as
Speaker 4: we were invited and we crossed to the to nine percent,
Speaker 4: we said we would reach twenty nine. We reached twenty nine.
Speaker 4: We said we would ask for authorization from a regulator.
Speaker 4: We asked for that authorization. We also said when the
Speaker 4: tone changed that we would wait and not launch a
Speaker 4: transaction until we had the opportunity to sit down, go
Speaker 4: through the details and explain the benefit that this transaction
Speaker 4: has not only for the two banks and their city holders,
Speaker 4: but also for the sector Germany German industry in Europe.
Speaker 4: So we're optimistic than when the emotions are off the
Speaker 4: table and we can focus on what this really is
Speaker 4: and what it brings, we're going to be successful in
Speaker 4: having support.
Speaker 2: And I know you said that you only decide, I
Speaker 2: guess in a year if you got hostile and that
Speaker 2: or not.
Speaker 3: Is this something that's all?
Speaker 4: It's just that if you look at the timeline of elections,
Speaker 4: of forming a government, of having discussions on everything else,
Speaker 4: you're looking at three to four quarters minimum. And therefore
Speaker 4: that allows us as an investor to have an influence
Speaker 4: on Commerce Bank, see what the performance really is going
Speaker 4: to be and then take a decision when we have
Speaker 4: all the elements.
Speaker 2: We're also understand that Commerce Bank is changing their strategy
Speaker 2: or adjusting their strategy this week. Maybe also to fend
Speaker 2: off a possible bit for you, what would you do
Speaker 2: differently if you're in charge of Commerce Bank?
Speaker 4: Well, look, I think we'll see tomorrow, but we all
Speaker 4: would be surprised if the plan was not optimistic. It
Speaker 4: always is when someone tries to fend off attention that
Speaker 4: they we are not pleased about. I think for me,
Speaker 4: the important is does the plan strengthen the bank? It's
Speaker 4: overly people overly focus on cost reduction. I think does
Speaker 4: it strengths to the bank, which means you search for efficiency,
Speaker 4: targeting your cost reduction in the areas that do not
Speaker 4: add value, that are duplicative, that are overhead, etc. But
Speaker 4: you then use a lot of that money, in our
Speaker 4: case more than to third reinvesting the bank in technology,
Speaker 4: in data, in the network, in the factories, in strengthening
Speaker 4: the overall bank, and in the people. I think for us,
Speaker 4: seeing plans that go into this direction, which we feel
Speaker 4: is our blueprint, gives us comfort. Seeing plans that just
Speaker 4: put up reduction doesn't. More importantly, specifically with respect to
Speaker 4: Commerence Bank, I would say that there is concern on
Speaker 4: the state of their technology, the obsolescence, the fragmentation, whether
Speaker 4: or not they have ever integrated the two systems of
Speaker 4: Commerceman and Dresna from the acquisition, whether they'rey investing enough
Speaker 4: to modernize as opposed to just run and their corporate center.
Speaker 4: Their corporate center has almost forty five percent of their assets.
Speaker 4: There is very little information on what those acsets are,
Speaker 4: their duration, their risk, the rates of a fixed rate
Speaker 4: and not fixed straight and most importantly how that is
Speaker 4: important to running the core business because I do think
Speaker 4: that nowadays banks have moved away from having a large
Speaker 4: corporate center with large assets that really don't have a
Speaker 4: day to day impact on running the business and move
Speaker 4: on realizing results on running the business day of today.
Speaker 2: Andrew talk to me also about a little bit about BACOBPM,
Speaker 2: So how close are you to getting more well?
Speaker 4: Look, I think they are announcing their plan today, or
Speaker 4: they have announced their plan today. I haven't had time
Speaker 4: to go through it. My expectation is it's again going
Speaker 4: to be quite optimist. I think the question in all
Speaker 4: of its plans is number one, you can put a
Speaker 4: good plan on the board and let's see if that
Speaker 4: is the case. The second question is are you going
Speaker 4: to be capable of executing it? And coming from sixty
Speaker 4: quarter of RUSSOM execution at unique credit, I do think
Speaker 4: execution is difficult, particularly now with the environment going against you.
Speaker 4: So in the case of BPM, I guess if we're successful,
Speaker 4: we'll never know. If we're not successful, we will in
Speaker 4: the case of Commerce Bank, we will have three to
Speaker 4: four quarter to observe whether what they put on the
Speaker 4: board is actually happening or not. That's what I can
Speaker 4: say for US. BPM is clear. I think you know
Speaker 4: how many years it has been rumored because it's very
Speaker 4: complementary to unique credit. There are almost no overlaps into
Speaker 4: a network, there are no overlaps in the clients. We
Speaker 4: don't see any issue of concentration and as actually we
Speaker 4: can provide more support and that's where the value is.
Speaker 2: So regulatory approval should not be a problem, you believe.
Speaker 4: Well, you never say that, but I would say that
Speaker 4: if you look at the numbers in terms of antitrust,
Speaker 4: in terms of a number of these items, we were
Speaker 4: very far away from having significant issues. So we are
Speaker 4: quite optimistic about that with respect to regulatory approval. We're
Speaker 4: two strong banks, so that should come as well.
Speaker 3: Do you think Credit agriucl is behind you?
Speaker 4: I mean thinks. I think, like in any transaction, you
Speaker 4: need to convince the shareholders of the target to be
Speaker 4: with you. We think we have had a good shot
Speaker 4: at convincing Commerce Bank shareholders look at where the shop
Speaker 4: price is today, and I think on BPM shareholders, we
Speaker 4: need to do our work and show the value that
Speaker 4: we would bring, the differential value that we would bring,
Speaker 4: and why switching from BPM stock in two hours can
Speaker 4: bring them even more value. I'm quite confident. We've had
Speaker 4: a long dated partnership with Creatical in custody in a
Speaker 4: said management in other areas. They know us, so I'm
Speaker 4: quite confident eventually they will they will be positive to
Speaker 4: a transaction. But it's up to them to decide.
Speaker 3: Are there active talks at the moment with Creative At.
Speaker 4: The moment we are not, And we need to be
Speaker 4: quite careful with any interaction because we need to treat
Speaker 4: all shareholders the same and petti passu and therefore that's
Speaker 4: why with the offering flight, we're quite careful.
Speaker 2: Do you think the government will green light the deal
Speaker 2: in general? Have you had more conversations with the government.
Speaker 4: Well, I do think that if you go back and
Speaker 4: you look at all the statements that have been made,
Speaker 4: I think they can be summarized that the government is
Speaker 4: observing with attention, because there are some things that clearly
Speaker 4: any government looks for, but at the same time, they
Speaker 4: have been quite clear that they're letting the market function,
Speaker 4: and if that is the case, I think they're doing
Speaker 4: what we're supposed to do, and we'll do what we
Speaker 4: are supposed to do.
Speaker 2: Andre, are you pretty confident that UniCredit will be a
Speaker 2: bigger group in twelve months from now?
Speaker 4: Yes, I was done by yes to your question, it doubles,
Speaker 4: but I do think that one way or the other,
Speaker 4: the differential value that we will deliver through our main
Speaker 4: plan is going to further differentiate us from the competition.
Speaker 4: That should give us the credibility of the currency to
Speaker 4: be able to grow through acquisition in the next in
Speaker 4: the near future.
Speaker 3: Andrea, thanks so much for joining us.
Speaker 2: Was Andrea Orchild, the chief executive officer of UniCredit,