Andrea Orcel, Chief Executive Officer of UniCredit.
Bloomberg | Bloomberg | Getty Images
A top banking executive highlighted a possible divergence in the fortunes of the finance sector in both Europe and the US, suggesting more rescues of US regional lenders are likely.
“In the US, it’s about rescuing distressed banks, I don’t see any distressed banks being rescued in Europe,” UniCredit CEO Andrea Orcel told CNBC’s Joumanna Bercetche on Wednesday.
“I think in the US, judging from tomorrow, there could be more.”
JP Morgan on Monday acquired a substantial portion of the First Republic’s possessions, which included approximately 92 billion dollar depositsS. First Republic’s seizure followed an overall concern about the stability of smaller US banks amid the collapse of a Silicon Valley bank and higher interest rates from the Federal Reserve. Leading economists tell CNBC that more rate hikes could happen expose more weaknesses in the US banking sector.
But the banking authorities in the European Union, where Unicredit of Italy HQ has repeatedly stated that they do not see the same level of risk in this area, arguing that European banks are well capitalized and face stronger regulation.
He also stressed that intervention by UBS to buy Credit Suisse Held outside the European Union in Switzerland.
“You can see more of these [rescues] In the US, in my opinion, but in Europe that kind of acquisition is not going to be a driver of consolidation,” Orcel told CNBC.
He added that currently the biggest risk to the outlook is volatility, following the COVID-19 pandemic and Russia’s invasion of Ukraine.
The comments from the head of UniCredit come after the Italian lender reported its latest results on Wednesday. Net profit came in at 2.06 billion euros ($2.27 billion) in the first quarter — a jump of more than 41% from the previous quarter. The bank also reported CET capital 1 ratio, a measure of bank solvency, at 16.05% for the quarter.
UniCredit shares jumped nearly 5% on Wednesday following the results.