Bank posts strong revenues after wiping out senior traders

What would happen if the CEO of a bank behaved like Elon Musk at Twitter? If expensive senior staff were aggressively removed in an effort to shake things up? Would there be a notable impact on profits and revenues?

Today's results from UniCredit, the Italian bank now run by Andrea Orcel, arch big dog and former head of the investment bank at UBS, suggest there might not be much of an impact at all.

Shortly before Christmas, Orcel quietly eviscerated the heads of Unicredit's sales and trading business in what was billed (by Bloomberg) as an attempt at reducing complexity and slimming the senior ranks.  Lionel Bignone (head of equity and credit sales and trading), Jurgen Amendinger (global head of markets digital development), Sergio Ravich Calafell (head of corporate treasury sales), Guido Filippa (global head of institutional distribution), Armit Sharma (head of markets and structuring and solutions) and Carsten Wolfheimer (global head of cross-asset products) were all removed from their roles in the final weeks of December. Many were in Milan, but some like Wolfheimer are in London. "Almost all the markets executive committee are out," one senior trader told us at the time. "They've essentially removed everyone, so it's a massive bet."

Given that Unicredit's top markets professionals left only at the end of December, it's too early to discern the long term impact of their disappearance, but it's clear today that they at least had a good run before their elimination. As the chart below, taken from today's investor presentation, clarifies, Unicredit's 'client risk management' business was a key engine of growth in 2022 versus 2021. 

Source: Unicredit 

At Unicredit, client risk management is synonymous with the markets business, which revolves around large flows from the commercial bank. Brokerage and assets under custody, where revenues rose 45%, includes retail structured products, which also fall under the markets' purview. 

Can Unicredit maintain the momentum minus its top staff? It clearly thinks so: today's presentation stresses that it's "transformed and positioned to win" after its commercial "front line" was "revitalised and empowered."

Some of those affected by the empowerment have been left wondering, though.  "Deutsche Bank has had a similar dynamic and is increasing pay for its traders," said one. "But Unicredit controversially let go of most of its high-performing markets people at the end of last year."

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