UniCredit chief executive Orcel slashes bill for consultants

UniCredit’s Andrea Orcel has halved the bank’s bill for external consultants since he took over as chief executive, slashing it by at least €75mn as part of his aggressive strategy to cut costs.

The Italian bank paid more than €150mn to external consultants annually when he took over in April 2021 and that has been reduced by more than half, people familiar with the matter said.

The steepest reductions have been in fees paid to a variety of investment banks and consulting firms such as McKinsey and BCG for operational and strategic advice, which have been reduced by 75 per cent in the past year alone.

They are now paid a single-digit euro-millions figure, with most spending on external firms related to critical audit and compliance services, the people said.

UniCredit declined to comment.

The abrupt loss of income has ruffled feathers at those with longstanding relationships with the bank, which had been earning tens of millions annually during UniCredit’s fraught decade since the financial and eurozone debt crises.

As well as reducing expenses, Orcel’s aim is to eliminate UniCredit’s reliance on external expertise and bring those directing strategy in-house, increasing its autonomy, one of the people said.

The bank will still hire consultants and banks for specific projects, but on a one-off basis, they added. The money saved has been redeployed to hiring staff in the bank’s core Italian retail business, the people said.

The CEO has also culled operational staff at the bank’s headquarters in Milan, known as its corporate centre unit. Around 1,700 positions have been eliminated there and the same number of customer-facing roles increased in its branch network.

Since taking over, Orcel has exited underperforming business and pledged €1.5bn of cost cuts in an attempt to improve profitability. Recently, it has benefited from rising European interest rates and upgraded its net profit forecast for 2022 to more than €4.8bn.

Orcel has made higher capital returns to investors a key pillar of his strategy. Last year the bank announced €3.75bn via dividends and buybacks of its own stock. The shares have risen 10 per cent in the past year.

However, he has clashed with the European Central Bank over plans to significantly boost payouts to shareholders this year, pledging a total of €16bn by the end of 2024. The ECB is concerned this could deplete UniCredit’s capital buffers as Europe braces for a potential recession.

There is also tension with the ECB over UniCredit’s slow exit from Russia, despite sanctions being imposed on the country after it invaded Ukraine last February. It has a €2.4bn capital exposure to the country.

Orcel was set to become CEO of Santander in 2018, but fell out with chair Ana Botín, who withdrew the offer. The Italian was awarded compensation worth tens of millions of euros after suing the Spanish bank.

The UniCredit board is reviewing the structure and size of Orcel’s salary bonus pay package