UniCredit boss warns against more US bank rescues after First Republic
- JPMorgan announced Monday that it acquired a significant majority of the assets of First Republic.
- Banking authorities in the EU, where UniCredit is headquartered, have repeatedly said they do not see the same level of risk in the region.
- The comments from UniCredit’s boss came after the Italian lender reported its latest results.
Andrea Orcel, CEO of UniCredit.
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A top bank chief highlighted a possible divergence in fortunes for the financial sector in both Europe and the US, suggesting more bailouts of US regional lenders are likely.
“In the US it’s about distressed banks being bailed out, I don’t see any distressed bank being bailed out in Europe,” Andrea Orcel, chief executive of UniCredit, told CNBC’s Joumanna Bercetche on Wednesday.
“I think in the US, judging from yesterday, there could be more.”
JPMorgan on Monday bought a significant majority of the assets of First Republic, which included about $92 billion in deposits. The seizure of First Republic came after the collapse of Silicon Valley Bank and a general concern about the stability of smaller US banks amid higher interest rates from the Federal Reserve. Leading economists have told CNBC that further rate hikes could reveal more fragility in the US banking sector.
But banking authorities in the European Union, where Italy’s UniCredit is headquartered, have repeatedly said they do not see the same level of risk in the region, arguing that European banks are well capitalized and face stronger regulation.
They have also emphasized that the intervention by UBS to buy and save Credit Suisse took place outside the EU, in Switzerland.
“You may see a few more of these [rescues] in the U.S., in my opinion, but in Europe, that kind of acquisition is not going to be the driver of consolidation,” Orcel told CNBC.
He added that after the Covid-19 pandemic and Russia’s invasion of Ukraine, the biggest risk to the outlook at the moment is volatility.
The comments from UniCredit’s boss come after the Italian lender reported its latest results on Wednesday. First-quarter 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 a Common Equity Tier 1 ratio, a measure of the bank’s soundness, of 16.05% for the quarter.
UniCredit shares jumped around 5% on Wednesday after the results.