MILAN (Reuters) -It would be "disappointing" if the strict criteria UniCredit (LON:0RLS) has set for considering potential acquisitions prevented the Italian bank from deploying at least part of its ample excess capital in this way, its chief executive said.
"My view is that at some point you need to build the business, so M&A at the right price is better (than distribution)," CEO Andrea Orcel told the Morgan Stanley (NYSE:MS) investor conference in London on Wednesday.
In the absence of good M&A opportunities, UniCredit would need to add 1.5 billion to 2.0 billion euros ($1.6-$2.2 billion) a year to its ordinary capital distribution, which is already among the highest in Europe as a combination of share buybacks and cash dividends.
"If you ask me I'd be disappointed to be there because it means I haven't found profitable ways to invest in the business, and most probably it will be a balance of the two," he said.
Orcel said that banks' elevated cost of equity prevented UniCredit from "lowering the bar" on possible acquisitions, even when assets could be a strategic fit.
Even when an asset is strategic, the market needs to have full confidence in the cost benefits of any deal and the risk-adjusted internal rate of return must be at least 15%, Orcel said.
"So we're very disciplined on that ... even if some people think we should lower the bar," he said.
"We've looked at a lot of things. Because we look at a lot of things there is a lot of noise, but noise should also indicate to you that unless we hit what we want to hit ... [we won't act] and ... people waiting for that speculative move are going to be disappointed.
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