Sign showing UniCredit company logo
UniCredit represents a ripe opportunity to Italy’s rulers, led by Prime Minister Mario Draghi © REUTERS

In Goldoni’s comedy The Servant of Two Masters, an opportunist is driven to distraction by mutually-contradictory demands. Welcome to Italian banking, Andrea Orcel. The government wants the new chief executive of UniCredit to absorb struggling lender Monte dei Paschi di Siena. Shareholders expect him to reject any deal that would damage their equity, which first-quarter results revealed to be plentiful.

The success or failure of the urbane Orcel is therefore likely to be registered in a shorter period than the usual four to five years granted to most new bank bosses. Cynics fear the former UBS executive has accepted a pay package of up to €7.5m on the expectation he will negotiate and justify a takeover of MPS. His predecessor refused to do so and was ousted.

UniCredit represents a ripe opportunity to Italy’s rulers, led by Prime Minister Mario Draghi, former president of the European Central Bank. Italy’s second-largest bank has €14bn of surplus core equity tier one capital over its target level, Lex calculates. MPS’s own capital ratio is perilously close to its minimum requirement. It needs an injection of more than €2bn.

The question is how much the government, which rescued MPS four years ago, will pay UniCredit to take the historic lender away. Accounting legerdemain may cover some of that charge. MPS would only change hands at a steep discount to asset value, potentially generating a goodwill gain. But Italy must put up real capital too. Shareholders would be justifiably angry if chair and former politician Pier Carlo Padoan expected them to take a hit out of patriotic duty.

That melancholy possibility is one reason the shares trade at a lowly 0.3 times tangible book value. This compares with Intesa Sanpaolo, Italy’s largest bank, at a far healthier 0.8 times. Lower quality earnings are another reason. The market predicts net underlying profits of €2.2bn this year, 30 per cent below UniCredit’s forecast.

As for M&A, the impact of that pivots on one person. Time to show you can do better than Goldoni’s harassed factotum, Mr Orcel.

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