主持人: Hi everybody and welcome to In Good Company and today I'm in a particularly good company because I'm here with Andrea Oel who is also called the Ronaldo O banking. Andrea has really left his mark on the European banking industry. He's now the helm of UniCredit and just so many exciting things going on in your business and in your life. So warm welcome.

Andrea Orcel: Thank you very much. I'm very happy to be here. What is the biggest challenge that the European banking industry is facing just now?

主持人: Scale and transformation. I think they combine scale because without scale you don't have enough innovation. You don't have enough uh ability to invest in technology and in all the things that you should invest to then transform and transformation because we tended to look at legacy banks on one side, fintech on the other side. We looked at them, we didn't consider them. But if you take the next five years, five, seven years, they're going to converge. And therefore, you need to ask yourself, can I offer the same level of client journey, the same level of client experience

Andrea Orcel: with the same level of efficiency and beat them on what they don't have, which is the clients that we start with, primary clients, and secondly, the ability to deal with multiple products and complexity. there's been a focus on on having um a lot of competition in each country, right? So, ideally the competition authorities have wanted to have, you know, a lot of local competition in each country. Is that changing now?

主持人: Well, I think uh local authorities have want local competition and the European Union, the competition authorities are looking at that. By and large, if you get close to 25% market share in every in any area, you get blocked. M

Andrea Orcel: so that is to prevent anyone from reducing that level of competition.

主持人: I don't think that that is changing actually you have some market Germany is one of them where the market shares are way lower than everybody else

Andrea Orcel: and it's like everything in life it's a balance too much market share too much size does not support competition and a good service etc. too little market share and too little size prevents you from offering the clients what they want because

主持人: what's the best what's the best for clients what's the best market structure

Andrea Orcel: I think a midpoint. I think for me it's a midpoint where you have enough competition depending on the market and the client segment it changes but I do agree by and large that once you move over 20% market share in any place you need to start asking yourself if there is enough competition Because competition pushes you to be better. Lack of competition pushes you to sit and

主持人: so is there now too little competition in Switzerland for instance after the merger of UBS and credit space. Let's say that some people could argue that right uh and it depends again on which market segments because if you take the entire industry uh from a retail market standpoint so individual I think they're okay given all the banks that they have when you start moving on uh small and midcaps and large caps. So the corporate sector that level of competition declines because of how strong uh UBS with credit facilities. Do we need stronger banks in Europe to make Europe more competitive?

Andrea Orcel: Look, the the parallel I always use is uh if the industry which we always talk about is the engine financial services, banks and capital markets are the gasoline. So now Europe has two things. one it is trying to transform itself because we have never been faced with such a challenge in terms of the structure of our industry the leadership of our products. I mean, if you go if you travel to Spain today or if you travel to Italy, uh I would say in Spain, it's an extreme. Most car dealers from European producers are empty and most car dealers from Chinese producers are full. And so this for us is a shock as European because we had the leadership in that. And there are other industry where Germany or Italy or France had the leadership before that we don't have anymore. We need to transform that. In addition to that, if you take Europe in the last 15 years, we've been always lagging growth of US and uh China and uh we need that growth. So in order to do those two things, you need new policies and then you need to finance them. And I think some countries feel that they can finance them as they have done so far through government budgets. But government budgets are not enough. They need the leverage of banks and capital markets and our investors to be able to do that transformation and that financing. And I do think that at the moment the environment, the regulation, the framework in which we operate does not allow us to do that. Andra, um, not many people work with what they studied at university. At university, you wrote your thesis on hostile takeovers.

主持人: Yes, I did.

Andrea Orcel: And in September 24, you acquired a big stake in Commerce Bank. Yes.

主持人: What was the thinking behind that?

Andrea Orcel: The working for all this time in the same thing. Maybe I'm not as creative as people think. I I am one of those uh very lucky individuals that identified earlier

主持人: what they love to do and takeovers.

Andrea Orcel: No, I would say well at the beginning for sure I used to say that uh you know if I wanted to be a bean counter I would have gone in management and now

Andrea Orcel: I am in management but uh at university I uh I was reading so much about hostile takeovers and the attacks on Nabiscoco or all of these things that I wanted to do the same thing. I convinced a professor who was awesome to let me do a thesis on something that in Italy was not even understood and then I got myself through doing exactly what I wanted. I never regretted it. But in life you evolve and then your job evolves and uh that's where I am now. On commerce bank I think uh lots of question about that and uh usually M&A is viewed like an end on itself. I think after 35 years of M&A, M&A can be a fantastic tool to strengthen a company to catapult its further, but it can also be a doom or a bad thing because you don't do it in a disciplined fashion. M&A is a tool to your strategy. Your strategy decide what it is. You have a vision, you have a plan, you have a strategy, you're doing it organically. M&A can accelerate it if it fits and if it's done at the right terms.

主持人: How does Commerce Bank fit into all this?

Andrea Orcel: So let's say how can I put it? The night before announcing the famous 5% stake that we bought from the German government. It was something that totally fit in our strategy. Germany, we believe in Germany. Poland. We want to strengthen that area from a client standpoint. SMMES, this is our bread and butter across Europe. Affluent bread and butter across Europe. And uh we felt we had implicit support by the government and implicit support by the then leadership of Commerce Bank.

主持人: But that changed in the morning. We woke up to a very different world. I think we were discussing before this call on volatility and change. And every morning you wake up and you find a different reality. We found a different reality. And at that point uh the choice for us and this is one characteristic of M&A was one not go forward and therefore reverse course. We felt at the time that that would be an admission that we had done something incorrect and we didn't think we had. two stay as is and bob around or three get to the maximum we could get without launching a bid and then sit and see how the situation would map and we chose the third course that's exactly what we did uh between the end of 24 and the end of 25 in my opinion and in the opinion of my board it has been a success today we that stake will generate close to 800 million uh euros a year post tax growing assuming they make their plan and maybe in an undefined period of time there will be the the possibility to convert that into a combination that would make in my opinion US the most truly panuropean bank in Europe because let's say east of tin would have market share everywhere in leadership across Germany, Italy, Austria and VE.

Andrea Orcel: But why did the Germans change their mind?

主持人: I think a number of you know I I usually have learned in life to focus on what I control and not to speculate on what others do. I would say the following though. I think uh one of the things that have changed and many things have changed in Europe is we now almost always deal with coalitions. Coalitions are not uniform. This happens in Germany. It happen in Italy. It happens in Spain. I can take almost every country that I am activist. They're coalition. And I would say that the part of the government that we were talking to at the time was much more liberal and market friendly. The rest of the coalition was less.

Andrea Orcel: And maybe within the government, they were less aligned than one would have thought. And when everything came to bear and there was a lot of noise about it, they took at majority uh a position that was against the position of what anyone's side

主持人: had taken visavas.

Andrea Orcel: And then um quite soon afterwards you launched a bid for Banko BPM.

主持人: Yes, we did.

Andrea Orcel: So uh you're a boxer. Uh does it make sense to box against two people at the same time?

主持人: uh for us it was there were two things or or the following consideration. The first consideration is that by the time BPM emerged, we were absolutely convinced that while we would convert our derivatives and everything else into a 30% stake,

Andrea Orcel: we would not launch a bid in Commerce Bank in the foreseeable future. M so while there was all the financial planning of getting to 30% and converting the stakes there was no integration nothing industrial we would just sit on a financial participation so it wasn't boxing with two it was boxing with one

主持人: and then so we said if actually if now we launch BPM by the time we close the transaction and then we integrate it we will be able to go on the second Because in Italy differently from Germany we felt we would obviously our evaluation did not come true. We would close the transaction in 9 months integrated in 11 and it was in Italy. This is one of the advantages of UniCredit. We are active in 13 markets. So 13 legal entities, 13 boards and 13 everything. So the Italian leadership team would run the other 12 markets would not even notice

Andrea Orcel: and sequentially if the condition were then right we would be able to box the second boxer as you call it uh in another market with another team with another framework and that was possible. So one it was that two it was frankly shareholders we could not not at least try to participate in Italian consolidation which is one of our two main markets

主持人: uh if it was going on and just say well because I'm busy there I haven't done that and the market has consolidated away from me at least we needed to try

Andrea Orcel: and therefore we tried

主持人: and so these were the And at the time and we had waited for three and a half years the terms the financial terms were aligned. So we could do a transaction which at the time even if we reviewed up for premium we could bring in and look at our shareholder and say well strategically you know it is because you always wanted me to do it and term-wise it could return on investment 15% which at the time was about two points above my share back to adjust for risks and it would strengthen our business in Italy.

Andrea Orcel: So that that's why we brought it in. When you look into the future, do we need banks in their current forms?

主持人: I think as we started with this, banks will morph so takes take some some uh move into what

Andrea Orcel: into so let's say that the business model changing uh the way we do business is changing. um translated in financial terms. Maybe 10 years ago, you saw a bank, commercial banks, legacy bank, 50% uh cost income ratio. They're solid. They're good. 12, 13% return on equity. They're solid. They're good. Today, the same terms would be 40. In my opinion, if you 40% cost income ratio and

主持人: that means that the cost of 40% of your

Andrea Orcel: those mean that cost of 40% of my income

主持人: and the return on equity which was about 12%.

Andrea Orcel: I think today you need to have an ambition to be in the high teens so 18s etc etc. So the industry if you want to look at it positively is becoming more appealing

主持人: but it requires rethinking how you do things. If you're not sitting back and continuing to operate on the business model you did 50 years ago, 30 years ago, 20 years ago, you need to rethink the organization, the process, the way of working, the technology, the AI and change and change and change.

Andrea Orcel: So when you then take UniCredit and you sit in your chalet and you think about UniCredit 10 years from now, just what what does it look like? What is it?

主持人: Well, if you look at it from a client standpoint, and for a second, let me take individuals, families, uh I always say that to uh our people. If you have a session on Netflix or on some other of those platform that we're so accustomed to be on and then for any reason you need to switch off that and move on your bank. Do you have the same experience? Because if you don't you will not survive in five years. So the client experience need to evolve to what now in many other facets of our life we consider the requirement the bar the expectation and that requires a complete rethink of the way we operate

Andrea Orcel: especially on the tell us how you're going to change it

主持人: so I think um I think it's block by block so obviously banks are regulated I can't just change it needs to make sense the regulator needs to approve it But for instance, in my opinion, you know, you start and everybody says they do that, but they don't. The client needs to be at the you need to flip the organization. That's what we did. The client needs to really be at the center of everything you do. So when you think about the way you do a an onboarding of a client, when you think about how you grant a loan to a client, you need to start by thinking how will the client react to that. I'll give you a very example example. Consumer finance. You go in a shop, you want to buy something at UniCredit. Uh if you were not preapproved, and we didn't pre-approve many people, it would take seven days. Is that an effective way to support a client? It's not. Today, it takes 13 minutes. If you're not approved before, and most of our clients are pre-approved before, so it doesn't take 13 minutes. They know their limit. They can spend and they can go.

Andrea Orcel: In order to do that, it means my process which was 23 steps needs to become two. My credit models needs to be online all the time to assess the risk of that particular client segment etc.

主持人: My product needs to be targeted to what they want and I need to be in a position to react that quickly because otherwise I can do it fast but everything will blow up at the back. In order to do that, the entire thinking of how we do consumer finance has changed top to bottom. It has taken us three years. And the same will apply to mortgages. Mortgages, for example, you as a client, you don't need an answer in seven minutes. But you do want an answer in a week. If you are really keen to buy a house, you want to know if you have a financing or not in a reasonable period of time to move. And I can combine that. Let me see another one. I give your consumer loan seven minutes and I know from where you're spending that you're buying a trip to Egypt. Do I offer you uh flight insurance, travel insurance in general? Do I offer you discount at my um at my clients who are all supermarket chains or whatever to get I don't know boots or the right casual wear do can I do that

Andrea Orcel: because if I can do that then I have financed your dream and I am suggesting to you other things to close the experience.

主持人: How will AI uh change this further?

Andrea Orcel: Well, AI changes that accelerating things. So, number one, what AI does and this is what everybody's focused on is it reduces cost massively.

主持人: So, I'll give you one example. But, but are you seeing that already or is it still to come?

Andrea Orcel: I think what I would say honestly certainly for Europe I'm not in the US most banks with very very very few exception if any if you ask that question in at the end of 24 they would tell you something about AI but the reality is it was a curiosity if you ask them today or at the end of 25 they all talk about it they all know it's a big big critical item but now the question is how do we harness it and the first reaction that you see in many places is and I read it all the time I gave co-pilot to every one of my employees I sent everybody to a course I did this but that AI while it will make the life of your employee easier is that changing the way you work and is that transforming and extracting synergies

主持人: Oh, that's what I wanted to say. So now some banks and some are ahead of us, but we're trying to catch up quickly. So if you look at a credit file, very simple. You're a big company. You want a loan from us. I need to gather information from your accounts, from the internet, from a number of sources. create a credit file, all of that data, reclassify it into my spreadsheets, and then apply my metrics and tell you if you fit or if you don't. I'm simplifying, but that's that. Usually, it takes six weeks for one experienced credit officer to do that from zero to the to the end if all the data is available.

Andrea Orcel: We did a pilot together with one of our partners. We developed an AI engine to do the same. It took us one week to develop the engine.

主持人: And they could do on one where we had taken six week to prepare the fire. They could do it in 14 minutes with 98% accuracy. And this is the first trial. It will become 100% very very quickly. So what does that tell you? It tells you that if I take the credit process of a bank 80% if not 90% of the people in the large caps prepare files.

Andrea Orcel: So what are you going to do? Because now what are you eliminating 90% of the people the way of working changes you need to manage the social impact in many countries where I am I cannot do that if I don't reskill them. So it's progressive. So what do you do

主持人: and so it's that so for example we have since 22 end of 22 started a risk healing unit usually we have about well since then we've done about 650 700 people were people that are not leaving but that are good professional but just their areas are getting disintermediated

Andrea Orcel: so what do you reskill them to do

主持人: to move to other to other things where we need more of them

Andrea Orcel: I I think for example in my opinion banks have curtailed too much the human touch to the client. So I may want everything online but if I'm taking a mortgage of 250k I want to see a person in front of me.

主持人: So do you think banks generally will not reduce cost as much as people think?

Andrea Orcel: I think I think if you don't in five or six years you're not here.

主持人: Do you get people to change as quickly as you thought they would change?

Andrea Orcel: Uh I have been pleasantly surprised at uni credit.

主持人: Okay.

Andrea Orcel: But but it is I it is not you get on a podium, you do a presentation that probably some very intelligent consultant has prepared for you. You pontificate for an hour and then you step off and they're all going to do it. It doesn't work that way. Firstly, you need to co-opt them in realizing that this is going to happen with them or without them. So the choice is if we do it at the beginning, we have time to reskill you, we have time to change and we can manage our pace. If you wait to hit the wall, you're all on the street because this is happening one way or the other. It is happening. Once you have that conviction, then how do you manage and over how long in order to be able to manage at best the balance between being fast enough but on the other hand not doing things that trade unions and honestly society will not allow you to do. So can that be done? I think it can be done. We have done it again and again at Uni Credit and uh I find that over time if you provide alternatives and if you treat people correctly the outcome is more positive than people expect.

主持人: Another technology change we are um seeing is of course stable coins, blockchain and so on. Just where how is that going to fit into your business?

Andrea Orcel: Well, you know, if you had asked me three years ago, I would have said you I don't really know. Today, I think we are I think it is a priority. I think if you look at the modernization of markets, is it uh bonds? Is it equity? Is it contracts for mortgages? Is it this? It's just a change in technology eliminating intermediaries blockchain. That's what it is. Uh you need to be at it. And uh the other thing is if you're on blockchain, you need a means of payment and it's either a cryptocurrency which we only get involved to the extent that our clients want to do it because we are not we think it's too speculative for a commercial bank like us. So we support it but we're not using it. Stable coin is is fundamentally because it is a lot more stable. That's why we join a um a consortium of banks in Europe, Kalis to launch stable coin for based on euros because that's another threat for Europe

主持人: at the moment. If you look at stable coin only US dollar so that would mean that if you go on blockchain and you need a means of payment, you're risking to be completely disinterminated by US dollar. And the Americans love stable coin because what is backing them is the dollar

Andrea Orcel: and US treasuries.

主持人: And when will we when will we have a European stable coin?

Andrea Orcel: We are aiming to be out with a first stable coin, meaning that it's working. Um by the third quarter of this year.

主持人: What are the any other trends in financial markets which um make you nervous or worried?

Andrea Orcel: No, I I do think maybe one things and we were discussing it at the beginning. Um if you come from having lived uh let's say the pre-COVID area especially in Europe, you're talking stable interest rates and low you're talking cost of risk so default which are very low because interest rate are so low that they are very low. You're talking very limited to no inflation.

主持人: You're talking you can look at the next three years and very easily we be within one standard deviation in terms of projection. So you budget you break down the budget in pieces you have processes you tell everybody what to do and you track that today diametrically opposite.

Andrea Orcel: I remember that we did uh we launched Uni Credit Unlocked in December 2021. Our stock price reacted very positively, very detailed plan. It had taken us nine months to do it. A months later, Russia invaded Ukraine and the entire plan went in the bin and since then is the same. Uh we have interest rates which are volatile, geopolitics that are volatile, technology and AI that are changing the way we work. All the assumption that we make we wake up the next morning and they are changing because we see new things that we didn't expect. So now in my opinion to run a company to compete you need to understand what is the general direction of travel

主持人: and uh have such a deep understanding across your organization top to bottom of what is your vision, your strategy, your plan and that direction of travel that these sub teams be country or subset in countries retail corporate etc can constantly adapt and rejig what was the original plan to get to the same direction but adapting to a changing environment. And the style of management is diametrically opposite because you're constantly looking at how they have adjusted and seeing if it's going in the right direction rather than monitoring if they are applying what you thought they would apply at the beginning. And that adjustment is absolutely critical and unless the volatility we see around us goes down and I don't think it does I think this is a complete different way of running things and if you don't do that the repercussion are very difficult but to do that the level of empowerment the level of trust the culture that gels together your individuals and the understanding of where we're going why we're going and what are the levers that they can use and the comfort of your institution that if they fail within staying in the metrics you gave them, it's okay. They just need to flag it, regroup and start rather than I'm going to penalize you is massive. And this is a cultural shift that for banks which are very sclerotic is very difficult to do.

Andrea Orcel: How important is grit in your life?

主持人: Very important.

Andrea Orcel: It is probably at the essence of what I have always uh believed. I I think some people not everybody's equal. Some people are born more gifted than others and we see that every day.

主持人: But by and large uh I think that in a number of situation I would say in a majority of situation people that are at a certain level maybe not the most talented in the class

Andrea Orcel: that learn that fail and learn how to deal with failure. They learn how to learn from failure, how to pick themsel back up and how to go further. I think we share I think we share I think we share a favorite book grit by Angela Duckworth and absolutely and we did have Angela Duckworth on the podcast so yeah so you listen to it I think

主持人: where did you where did you where did grit where did grit start for you what was your you didn't have a particular hard upbringing right I mean you were a middle-ass kind of guy right

Andrea Orcel: I I well first of all I went I went through the French Lay and still today the French leay is very cartisian and the style of teaching I don't know today but in my times it was very hard you needed to deserve the place you had at that chair at that desk and uh and therefore it taught you to regroup and do better because otherwise you wouldn't survive that kind of style of teaching but in general it suits me why because um I believe that the impossible is possible somebody told me uh either where the impossible is impossible until it's done or if it's impossible be more creative and you will make it possible

主持人: and um I think human beings are here to improve themselves and grit is what tells me that I may start behind but through determination, resilience, consistency, ability to not take a challenge or setback as a disaster. That does not mean you don't react badly. You do. But then at some point say, "Right, it happened. Why did it happen?" Pull yourself out, start again. You evolve and you become a much better individual in whatever you set your mind to do. And for me going through this life and thinking if I'm determined if I really want it, if I work at it, I will be able to get there with a lot of effort but I will then it's a journey that is worth going through. And that's for me it's at the base of a lot of things that I believe.

Andrea Orcel: You speak uh most of the European languages,

主持人: not German, but I do Portuguese. My wife is Portuguese. At least I understand that you would tell me that I speak a der a derivative of Spanish, but I do speak Spanish. I do speak French, Italian, English, and a little bit of Portuguese.

Andrea Orcel: What do you um this kind of uh uh kind of panuropean uh uh places? What is it? What does it do to your thinking? You think

主持人: it's actually quite interesting and u my wife and my daughter always point that out. I still count in French. If there is a mathematical problem or I need to correlate things and I speak loud to hear myself on the logic, it's always French.

Andrea Orcel: I do presentation in English because I've been here for 35 years and therefore all my professional life has been that uh maybe I enjoy my life and uh enjoy communicating in Spanish when I am on holidays. So they have marked different aspects of my life and they they shape what I am altogether.

主持人: What kind of temperament or psyche do you have? Where is that from?

Andrea Orcel: Ah you can probably you can call it determined you can call it ambition you can call it dysfunctional.

主持人: Um for me what parts of it is

Andrea Orcel: I think for me it's that. So for example, a lot of people kept on asking me what about work life balance and I think that statement uh assumes that work is bad and you need something else.

主持人: Totally.

Andrea Orcel: And uh if I am doing the job I chose with the people I like and I am on a journey that is exciting, it's almost like it's not work. I'm actually enjoying the journey with the people I'm doing it. So I will naturally tilt towards more work and I do think that also these things move in life. So if you had known me when I was 25, yes I was working a lot. Uh today I'm still working a lot but because I have a daughter who is 15, my priority has moved. So this work life balance for me is choices.

主持人: But what is lot what is a lot? What's what is it to work a lot?

Andrea Orcel: Well, I think when when I was uh I still went through the boot camp of investment banks in the US when I was 25 where if you weren't doing three allnighters a week, did not take any holidays in your analyst years and weren't working six if not seven days a week. It was you were not through the boot camp at the end. I don't think that that's necessarily the right thing to do. Do you work your people really harder?

主持人: I think the work your people really hard. I don't believe what I think is because I work really hard I drag them. So I think u and if you ask many of them when they need time and many times I ask them to take time I am the first person who will never pick up the phone to to call them or to ask for anything. But I do think that if we are on a journey together and we're trying to get there and they see that I am allin, they choose to be allin. Now you could say, "Yeah, but by being all in, you're dragging them." I understand that. So to an extent, it is my responsibility to see if some others are going too far. And I stop it. But I don't demand people to be at a certain time in the office onto another time. For me, there is a task to be done. We're all doing it together. you're doing this part, I'm doing that part. Let's get it done. Is it important for you to be liked to an extent?

Andrea Orcel: I think uh I think there are you and especially when you get in more uh responsible positions or more leadership position. Uh it is very important to keep your feet on the ground and and remind you every day that you're no different. You're just having a different role. But at the same time and you need to be fair to people because you wield power that they don't have and you need to really think which I what I force myself to do uh how would I feel if that was done to me and uh not dismiss it. So we talked about M&A. M&A takes a completely different meaning in that context. When you are 25 years old and you're doing a spreadsheet it's numbers. when you are 62 and you're evaluating what you're going to do with people, it's a completely different things to do. But I do think that unfortunately life is not fair and unfortunately life is tough and if you're leading an organization there are decision you need to make in the collective interest and not taking those decision because not everybody thinks that they are the right decision is wrong and I do believe and I have seen it again and again and again that even the people who disagree with you prefer that having listened to everybody you said right I listen to everybody this time. This is it and we're going in that direction.

主持人: So, it's not important for you to be liked.

Andrea Orcel: No, not in the way you define it.

主持人: Then I would love to be liked in many cases. Um, you challenge the establishment in many ways, right?

Andrea Orcel: I don't know if you can say that. I I would I would say more that for me the other thing that is important and it happened to be already once when I am through with this job. uh I want to be in a position to look back and don't have any regret and that means have I done everything that I could and I thought right at the time

主持人: to do the best by my organization by what it is and did I leave a better organization as a result and so well I think I think I think if we look at your results so far when you became CEO 5 years ago share price was eight and today is 70 and you paid seven in dividends so 10 times Yes.

Andrea Orcel: So that's like totally outstanding, right? Um

主持人: Yes. But I would tell you one thing. If you look at the team,

Andrea Orcel: so the 69,000 people that are uni credit every day,

主持人: they live and breathe that.

Andrea Orcel: Yeah.

主持人: They're so it's almost like this gave them back their pride. When they talk to client who say, you know what, thank you because I'm financing my holidays with the dividends that I'm getting from Uni Credit. they're riveted to have that kind of interaction with a client. So there is an element that is not just performance is what that performance mean in terms of achievement both sides.

Andrea Orcel: Where did you learn this? Because you've been working at places like Goldman's, BCG, Maril Lynch, UBS.

Andrea Orcel: Uh I think you go back to if you are very focused if not obsessive on what does excellence look like and how do I get there number one. Number two if you are ready to listen to people who know a lot more than you do. So I arrived at Uni Credit. I have done as an adviser commercial banks for 35 40 years but I'm not a commercial banker. I'm an investment banker.

主持人: Most if not all of the good ideas that transform uni credit come from listening to people in the branches and in the and in in the trenches in general. So I think if you want to achieve excellence and you have a humility to listen to people

Andrea Orcel: and then over time you can bring that together into so means this work with doesn't work we need to pull it together this is the strategy we're going to do you will find that it's a lot the process is hard but the outcome is easier and the other thing that is very important is that because you went through that process and because the ideas are by and large coming from people who feel that is my idea and I'm seeing it in action.

主持人: They're embracing it 150% and want to take it on the other side. So I do think that these are generic things that you have. The rest is

Andrea Orcel: I tend to maybe be a little bit obsessive. I think about banks all the time. My wife would say that in the first trip we took, we went to Mexico and before we even went to see Chicha, I went I took her to see a branch because they were the most modern at the time to see how they act, how they function because I like the industrial makeup of how it goes from the client all the way back. So, it's a number of things, but ultimately you need to love what you do. You need to have that aspiration in order to get it done.

主持人: Yeah. when you make decisions, how much is instinct or uh pattern recognition and how much is analysis?

Andrea Orcel: So I think it's both. I would say the following things. The first thing is maybe that helps. Uh having witnessed trading for a large period of my life. Uh we used to say that the outstanding traders are right 55% of their time. Not 100 and not 90 and not 80, 55. But they're very good at cutting their losses on that 45% understanding what was wrong. They cut their losses with discipline. They start again. Um so that has always defined my view that speed is important. So yes, you need to get as many element as possible but there is a point where you need to take the decision and you will never have 100% all the facts. Is there there uh an element of gut feeling? Yes, by definition there is when you are taking decision on thorough but incomplete information at speed by definition there is an element of gut there is an element of I would say I don't know if you want to call it discipline of humility of saying I know this may not work so let me observe it and then let me be ready to acknowledge if I made a mistake I cut it off I start again you cut your losses not it's a decision that the boss was made. So it cannot be wrong because then you dive into a situation that is not good. And I think if you do that again and again and again by iteration you get in the right parameter at the right speed.

主持人: When you compare how you spend your day now compared to let's say three and five years ago how how has it changed?

Andrea Orcel: I would love to tell you that it has changed. I think the element that has changed is that I know the people I work with a lot better and let's say when I arrived by definition I was relatively cold because I was not emotionally invested I arrived to do a job today I am emotionally invested I think

主持人: what what are the implications what

Andrea Orcel: the implication of that is positive and negative there are certain decision that I need to force myself to take because I know the consequences and I know the consequencees is they have on people that I I know the face off. I know what they do and I know how they're going to react. Before it was easier. Uh at the same time it feeds energy because it it feeds in you and into at least for me I can't let them down. We need to get that done. We can get that done. What does it take to get that done? So it gives you an energy and a determination that otherwise you don't have. You are known for spending more time on capital allocation than other CEOs. What tell me about how you think about capital allocation.

主持人: I would say that I'm known for a lot of things. Most of them are not true. I would say that uh if you asked my team, I spend most of my time let's call it on the industrial side of the business. How do the process work? How do the technology work? How do the way of working work? Can we change the organization to make it better? Uh why that product rather than that solution etc etc. So I go a lot in the details.

Andrea Orcel: So one thing is to ask people who know more than you the classic subject matter expert on the branch risk or whatever. Another thing is to be oblivious and delegate everything because everything is okay. So I try to understand everything that occurs. It is true however that one element that banks and this comes from my advisory career have had always underestimated until recently is that we have cost operational and we have cost of equity with a cost as well. So not factoring in that my cost of capital is 9 10 11 or 12% or when I started 17 is wrong and therefore in the decision that we made we prioritize the deployment of capital which is a scarce community commodity it doesn't belong to us we're entrusted by shareholders on that into the places where we could extract the best return. It started with that then it's then it became how can I make the places where the returns are lower better performing so I can deploy the capital there as well and therefore capital allocation between became a mantra for driving a business that both grows profitably because everybody talks to you about growth or return. If you look at the plan we have now that is no news. What we're saying is we want to be at the optimal intersection of growth and distribution. To do that, you need to have maximization of profitability. And therefore, you need to seek a growth that we call it quality.

主持人: A growth that seeks to defend margin to go in the places where your comparisons don't go for any reason. Too complicated. They don't have the infrastructure. They don't have the knowledge. It's too painful to create value and find that and obviously when we look at it from a financial standpoint is

Andrea Orcel: what is my cost income ratio in that area. So how efficient I am and secondly how much capital am I using and is that capital being rewarded above what it cost me or not. We look at that and we rank the businesses. But then we go back on those businesses and we say how do we run them? Can we change? It's like building a car. A process step, step everything is a step. Can we change that and automate it? People tend to automate. First you need to redesign the process. Then you need to automate and use AI.

主持人: How have you redesigned the corporate culture?

Andrea Orcel: So this is a good question because uh I believe that culture is the lynch of everything. everything. Yeah.

主持人: You have the right culture, eventually you're going to win.

Andrea Orcel: Yeah.

主持人: Uh I I

Andrea Orcel: So when you came when you came in the first day Yes.

主持人: and you sat down and talked to people, what what part of the corporate culture do you think, wow, I think we need to to change this?

Andrea Orcel: So I would say this first of all, changing completely a corporate culture is very difficult and takes an extremely long period of time. Eventually,

主持人: how long time does it take? changing it dramatically more than a decade because inevitably

Andrea Orcel: to change it you need to purge the people who are not in that culture and if you have 80,000 people below you and most of them are not in that culture it's going to take you a long long long time so I don't think you can impose your culture

主持人: in the way I look at it is you better go in a place where your way of principal value culture matches maybe not 100% but to a large extent otherwise you're going to have a very difficult time uh what did I have in uni credit I think I knew uni credit from before

Andrea Orcel: uh I think they always stroke me as living and breathing uni credit they adore uni credit uh we say in Italian they wear the UN credit t-shirt when they work when they're not at work for them it's an element of pride they're part of that team not many institutions are like that coming from investment banking not many institution like that I have people who have been there 20 years 25 years 30 years and they love to have been there for all that time second thing they used to be the team to beat in the early 2000s and they were accustomed to be the team to beat they were fast innovative aggressive. They were not maybe with the benefit of hindsight, it's always easy. They were not harnessed in a box that prevented them from bringing that aggression and the speed etc. to things that then converted in problems.

主持人: But the DNA was a winning DNA.

Andrea Orcel: And I felt looking at the outside that over the retrenchment that they had to suffer and to a certain extent I would call in almost humiliation to go from the top to the bottom they still had it in them and it was just a question of putting them back in a position to achieve it. So rather than changing the culture

主持人: uh what I did when I arrived is I spent nine months contributing with a small team to interviewing directly indirectly about 20,000 people 30,000 people of the 80,000 that we had try to determine what were the principle and values that made them tick very interesting integrity

Andrea Orcel: very many people well I would say an organization that doesn't talk to you about integrity not very likely.

主持人: not very likely.

Andrea Orcel: Second, already ownership for a commercial bank is quite a lot.

主持人: Mhm.

Andrea Orcel: And thirdly, care. Coming from investment banking, I didn't expect that to be there. It was the first most voted tenant that they wanted to have

主持人: because investment banks don't care. You mean

Andrea Orcel: well because probably care about your colleagues, care about your clients, care about a lot of things that have to do with the organization. And I think investment banks are more individualistic

主持人: than they than a commercial bank like this was. And uh I think on those pillars we started saying okay so now we are going to have do we all agree with that vision? Do we all agree with that strategy? We do we all agree with that plan? Yes. Do you feel passionately about it? Yes. Then we empowered them back. We had a very top-down command and control structure. Now we are probably one of the most empowered bottomup organization.

Andrea Orcel: But in order to do that they need to believe in the vision, the strategy and the plan. They need to be harnessed or or or or structured around KPIs that they believe in and they can understand and one culture. So fundamentally I talked a lot about the subject matter expert in the branch in risk etc. they are much better than I am to doing their jobs. However, I need to understand that when they make the decision, will they have in mind the same concern, principle, and value that I have in making them? Because they may be very good,

主持人: but if they go in the wrong direction, what how do you control all of that? And so, culture is what makes you confident that 95 98% of the time you're going to have the right outcome. Is there anybody from outside the world of banking which have inspired you? Any other discipline?

Andrea Orcel: Outside the world of banking. Well, I go back a long way because I am a fan of when I was a child. Maybe that shaped me. Uh a Roman general that was called Cipio who did the impossible. At 26 he was leading the Roman legions against Hannibals in Spain. And then he went and took back I don't know how you call it in English, Cartago I think. and beat Hannibal with his elephants. It was all about strategy, empowerment, taking the best of individual pred and doing the impossible. More recently,

主持人: that's how you beat the auto elephants out there. Well, you know, very So, put it this way. You're uh a Roman infantry with a nice little shield and you're there and they charge on you with an elephant and you're told it is possible to withstand the attack. It would be classified as impossible, but he found a way to do around it. So, for me, it was that creativity. I

Andrea Orcel: mean, it's suitable because you were actually born in Rome, right?

主持人: I was born in Rome.

Andrea Orcel: Okay. And it's so it's all coming back.

主持人: So it's all coming back to that.

Andrea Orcel: It might it might but in the more let's say in the more modern world uh I had uh let's say co as I was blessed to be an adviser that taught me a lot. Uh nobody's perfect. I'm not they were not. But Emilio Bautina Santandere taught me a lot on uh humility striving for improvement all the time.

主持人: how to galvanize people uh Stan and Mary Lynch uh meritocracy

Andrea Orcel: uh empowerment

主持人: uh how to make people take ownership of things then all of them including me

Andrea Orcel: you worked with you were an adviser right so you had uh Stan Neil I was working for him as I was working at Maril Lynch Emilio I was an adviser yes yeah so you had a unique insight into into these people um now if you were just your leadership principles just uh the most important ones that you adhere to.

主持人: So leadership principle I think there is a quote I like a lot from Admiral McRaven who said if you want to conquer the world or change the world start by making your own bed.

Andrea Orcel: Yeah.

Andrea Orcel: Um the this leads into whatever organization especially of large people that you have around you. Uh you need to listen. You need to be part of them. Um you need to spend a lot of time with the people you lead. Understand them. Show that you're not a Martian from out there but you're one of them. That you value them. Explain. Listen to what their questions are. Get them to guide you on some question that you may have and be humble enough to accept the challenge not as an attack on you but as something that will make you stronger.

主持人: Then there is uh and so these things I think and then realize what we said before that your job is just one part of the puzzle of bringing it all together into something that they share that they can identify that they feel passionate about and then drive them towards excellence because at the beginning the impossibility is this guy is asking too much of me but then it becomes wow you know first of all many times what I thought was impossible I

Andrea Orcel: that gets you to rerate yourself in a way that make you almost walk on air and even if you fail

主持人: usually you're ahead of the people who just aim to be to arrive to the media not to the possible where does your drive come from who do you want to show

Andrea Orcel: I think to a large extent myself I don't like contrary to what people believe uh public recognition

主持人: I like to think of myself I set an objective it was very hard and you know what I got there

Andrea Orcel: and I got there and now I'm going to set another one and I will get there for me it's uh it's self-satisfaction to a very large extent

主持人: your mother worked for the UN

Andrea Orcel: you're right you did your work

主持人: was in Rome

Andrea Orcel: has it been important for you to make her proud or or your father

主持人: very very important because uh from a young age u diversity uh I was exposed in Rome both because of school because Rome is the only city in the world where you have embassy and consulate to the Italian state, the UN and the Vatican. So it's full of public servants from every part of the world and they tend to gravitate to a large extent on international schools but Frenchly say was one of them. So, diversity of views, diversity of religion, diversity of belief, but we're still good friends. That did shape

Andrea Orcel: uh and I was um I grew up in a generation that thought about openness

主持人: u attracting people who were different through demonstrating that there was more we could do together, etc. So I'm not leaving very well the world of fracture separation distances that we have today.

Andrea Orcel: How do you relax?

主持人: How do I relax? Um today I spend time in order with my uh wife and daughter or with my dog or I do sports because it takes my mind. So, we talked before about boxing

Andrea Orcel: because while you're doing it, your mind needs to focus on your adversary or you're going to get punched every bite that very quickly, but you need to focus on what you're doing. But that forces me to completely let go

主持人: of everything else around me. And that for me is a is luxury. I I don't get to do that very often. And uh so physical exercise or endeavors where I need to focus. I love skiing open air with my family both on water or on uh snow. Uh yeah, this is what I do. I don't do much more. I don't

Andrea Orcel: What you read? What do you read?

主持人: I read from time to time. The last book I I I I recently reread because I read it a long time ago. There is a book by a Spanish author actually called Poster Gillio who uh wrote this book about the cursed relegence which is CP invasion of Africa and uh obviously it's it's a story as well as historical facts. is very uh good from an historical standpoint, but it's a story and it's a good to get my mind away from everything else and get absorbed in something completely different.

Andrea Orcel: Mhm. What is your advice to young people?

主持人: That's always very difficult. Advice to young people. Um I would be generic. I would say number one, take the time to choose the journey, the job, the trajectory that you love, that motivates you, that gets you there. I remember that being in investment banking, which was a choice as you remember that I did because I loved it. People were asking me first question, when will I make my first million dollar? And my first answer was if that is why you chose it very very hard to get to that point because you need to go through boot camp. There is no money that is going to compensate for that if you don't like it. So number one make sure there is not what your friends like what your parents like. Make sure the choice is your choice and you really like what you do. The second thing is choose to do it in organization and with people where you identify. When we're all young, we think that a bank is a bank, a company is a company. Banks and companies are very, very different. I worked at Goldman Sachs. I worked at Maril Lynch. Arguably, many many people would tell you Goldman Sachs is a materially better company than Maril Lynch was. One went almost bankrupt, the other one didn't. But for my character, Marilynch was better because I I thrived in that environment and at Goldman I didn't. That does not mean Goldman is not an exceptional firm and my best friends are still there. Fantastic. But where you do it is very important because that kind of company will will attract people that are with whom you have something in common or not. And if you have those two things then the rest is going to take care of themselves. The other thing is do have an idea of the direction where you want to go but don't think it's going to happen the way you think it's going to happen because

Andrea Orcel: careers are not straight line the jigsaws and actually the failures are probably as important if not much more important because of what we were saying about grit than the wins. you don't you're satisfied with win you don't learn anything from wins failures you learn a lot about yourself and about what to do better so if you have those things and then I would say more recommendation I hope that the generation that is coming into the ranks today doesn't take no for an answer does what today seems impossible which is getting the world to go back to a center that is from which we are going way that uh I think as a generation if we don't do something we have we're leaving our children in a situation that is not as good as the one we found

主持人: when we were very age.

Andrea Orcel: Well Andrea it's um very clear that you know where you're going that you don't take no for an answer that you love what you do and you do it with people. It's been great.

主持人: Thank you very much.