Leaders in Finance: Stefano Porro - Chief Financial Officer of UniCredit Group

On February 27^th, 2024, the Master in Corporate Finance (MCF) class had the remarkable opportunity to meet Stefano Porro, Chief Financial Officer at UniCredit Group. This meeting was an immersive learning experience that shed light on the evolving and intricate role of the CFO in a complex and international business environment.

The past decade witnessed a surge in both public and private debt, largely attributed to the expansionary monetary policy, along with significant shifts in bank balance sheets. The recent surge in inflation and related restrictive monetary policy, along with aging population, have further compounded macroeconomic variables. Notably, aging population exerts considerable influence on banks activities and future perspectives, as it underscores the need for a different approach to the incoming challenges, beyond traditional macroeconomic factors.

While GDP growth in the eurozone has been revised downward for 2024 and is currently stagnating, certain Southern European economies – namely Italy and Spain – are suffering the consequences of inflation and the Western Countries’ restrictive monetary policies. However, the default rate, at least in the Eurozone, has remained relatively stable, thanks to more liquid financial institutions and improvements in asset quality. This not only mitigated the default risk, but it also reduced the expected losses, bolstering the resilience of financial institutions.

Liquidity and funding play a fundamental role in determining banks’ capital levels and risks exposure. In a low rates environment, like the one that lasted more than a decade, profitability relied on robust focus on fees and cost reduction, beyond rising volumes. Besides, partnerships emerge as a more viable way to run business expansion, offering a less onerous alternative to acquisitions. Moreover, improving the internal IT infrastructure, digitalization and data organization unlocks value in terms of a better cost efficiency. Furthermore, internal risk models play an essential role in assessing default probability, and, by consequence, guiding the strategic decisions for more effective risk mitigation.

As the economic landscape undergoes a structural change, banks should prioritize the quality of assets. In a context of slowing economy and evolving macroeconomic and demographic factors, prudent risk management and asset allocation become essential. For this purpose, the trajectory of net leverage serves as a critical indicator of financial resilience, mirroring the delicate equilibrium between maturities and liquidity on both sides of balance sheets.

UniCredit exit from the G-SIFI list has not changed the way the bank operates, notwithstanding the less strict regulation requirements. The reduction in net loans on UniCredit’s balance sheet reflects both lower demand - mostly due to recent restrictive monetary policy - and the bank strategy too. Regulatory compliance and risk management remain key for the bank, particularly in cross-border operations.

Finally, Mr. Porro underscored the importance of discipline and work-life balance: prioritization and time allocation are essential, with curiosity serving as a catalyst for insights. Pausing for reflection and emphasizing quality over quantity are indispensable in fostering personal and professional fulfillment.

SDA Bocconi School of Management