Welcome back, everyone. Our second day of Financials Conference at the Bank of America. So I'm very pleased to be introducing our next speaker today. It's Andrea Orcel, CEO of UniCredit. Andrea, thank you very much for taking the time.
Thank you, Antonio.
I see a full room, everybody holding coffee cups, so I think we're ready to start. I remind everyone, you know the rules of the game by now. We'll cover a few topics over the next 30-35 minutes, and we'll leave 10-15 minutes for Q&A. I think this session is being streamed on UniCredit's website, so please make sure that when you ask your questions, you wait for the microphone. I think with that, I think we can, we can start. And maybe why don't we start by sort of looking back at when you joined UniCredit, less than two years ago, with a vision, a mission for the bank, to be the banks for Europe's future and set a new benchmark for the industry.
What are your thoughts, looking back on the past two years?
Well, I think that, when we started this journey, everyone thought we were too optimistic, and in fact, looking back, we were not optimistic enough. I think what we... What certainly I underestimated is the capacity of the bank to react and to unite, and achieve objectives that were quite demanding. And if I look at it today, we are a completely transformed group. We are very different from where we were in 2020. I think if, I express that in KPIs, we reignited revenue growth, and it's very focused on quality, which for us means discipline on risk and capital light. We achieved leadership in efficiency.
From a cost standpoint, I think we have declined cost every single year since I have been here while increasing revenue, and we achieved a 39% cost-to-income ratio at the end of the second quarter, and we think we can defend it. We massively improved our efficiency in capital deployment. We're now in the top tier in terms of revenue to RWAs, and in terms of organic capital generation, we're definitely a positive outlier. If you look at profitability, I know we always look at normal profitability, but if you take away the excess capital, which is depending how you count, between EUR 7.5 billion and EUR 9 billion, you're looking at a return on equity in the 21%.
Now, there are a lot of things that have helped that, like rates, but they have helped everybody else, and we have moved from a lagger to a leader in all of these metrics. That has been done without sacrificing capital. Indeed, every time we distribute, we increase our capital. That may be a debate with some investors. Secondly, asset quality. Our asset quality has massively improved in terms of ratio, but also massively improved in terms of coverage, and we have EUR 1.8 billion of overlay standing there to take shots. And we have improved our liquidity because we were quite focused on that metric before the events that we saw earlier this year.
KPIs have all gone in a way that I couldn't have asked any better, but I think what is important to realize is that that is supported by an internal transformation in terms of a number of things that is not fully in the numbers yet, and that you will see increasingly in the next few years.
It definitely felt more than two years, and I think the bank has changed a lot in those two years, and I think that's clearly shown by the 10 consecutive quarters of growth. The two years behind us, I know, we know them quite clear, people have liked it. How shall we expect for the outlook for the next two years?
Well, we are certainly, at this point in time, we are very positive for 2024 and still positive for the near future. Why that? Firstly, if you take, if you take the P&L and you take it bottom up, on cost, we're gonna decline next year vis-à-vis where we close this year. We have the integration cost to demonstrate it. Incidentally, we've taken EUR 300 million of integration cost in 2022. We're taking EUR 500 million plus in 2023. I'm not gonna take integration cost every year over the next 10 years. At some point, it stops. These are EUR 500 million that are gonna disappear at some point.
If you move further up and you look at our cost of risk, this is a bank that was running at a 50-55 average cost of risk through a cycle with peaks at 80. We're now running at 20-25 basis points cost of risk through a cycle. By the way, if you look at the last six quarters, our cost of risk, excluding Russia and excluding overlays, has remained in the single- digits. If you do another analysis and you take away the write-backs, which we have much more than the other banks because we're conservative in our provisioning and in our staging, then we have averaged around 20-25, every one of the last 6-8 quarters. So we are in that place there.
We have guided that this year we're gonna be at the same place, and we're not sacrificing provisioning and overlays in order to propel our results, but we are creating a line to support the future. Even if next year it degenerates, we have 20-25 basis points of risk, so we can double the number that we have in our plan using the overlays without deviating one iota on the net income line. If you move further up, you look at revenues, I think that's where the big debate is. I think on NII, everybody expected to have almost that, and I think it's gonna look more like that... going forward, meaning what? Meaning, first of all, that we're gonna have higher rate for longer.
I mean, we've, we've called that one wrong in the past, but now we know we're at 4%. The guidance or the implicit guidance is that it's gonna stay well into the first half of next year. That means that the average rate for next year is gonna be equal to this one or better than this one, i.e., around 3.5%. Then you look at pass-through. We have two stories. We have Italy, and we have the rest of the group. The rest of the group has fundamentally converged to where it was before, and actually, in some cases, has gone further, with some countries already looking at the declining rates and what happened, like the Czech Republic or Hungary. And so there, pass-through does not affect significantly.
Then you have Italy, and what I can say here is, again, here we have underestimated the structure of our deposits. And since the end of Q2, we've probably moved 2 points in pass-through, which means we are at the low end of the 20s. We were saying we would have an exit rate of 40 this year, unlikely. And then we took it down to 35, unlikely again. At the moment, we're looking at something that is more in the 30s. But what is more important is that with rates having gotten to that level and pass-through not really accelerating a lot, it's difficult for us to see an explosion of pass-through in any of the future quarters, so there's gonna be more grinding going up.
That means next year, yes, same rate, higher pass-through on half of the franchise, so some attack on the commercial part of NII, true, but then you need to look at the offsets. The offsets are, one, certainly for UniCredit, we have been cleaning up the EUR 450 billion of our portfolio, and therefore we have had negative volume in there. And, for example, our market share in mortgage has been compressed because it wasn't profitable, but now we're not compressing again, so we're gonna have a positive volume effect going forward that we don't have now. Second thing, and I think everybody talks about that, is replication. Replication for us is EUR 170 billion.
We get about EUR 17 billion a year, and you are generating about EUR 400 million of additional NII every year just by the old replication portfolio moving to the new rate. That is sustainable over time. I don't think it's something that will go up. That will buffer the compression. Certainly, in 2024, all of these things together are probably more on the positive side. As we go in 2025, they will buffer the compression. What people do not take into consideration, I think, is fees. In fact, a lot of people say UniCredit is an interest rate sensitive bank, which is true, but we're less interest rate sensitive than many of our peers. Go and look at our NIIs over the last two years, we've benefited less.
Where we have done rather better is on fees and other income, because what is hidden by the current environment is all the investments we've done in our factories. I think if you look at 2025 onward, we'll probably internalize life insurance. That means we're bringing in the 50%, 51% we do not own of the manufacturing side into our income. We have built a protection platform that we didn't have before. That was something that people said we couldn't do internally, but if you look at Italy, volumes are growing, excluding CPI, 95% year-over-year, granted from a low value, but 95%, and we have 14%-15% of new protection in Italy as we speak. We didn't have the technology integration with Allianz until September. We didn't have all the products until September.
So we think that that is gonna carry. At Q3, I'll give you a glimpse of what payments are for us. I said I would, but the real strategy will be in Q1, but I will give you a glimpse. These are EUR billions, and 90% is fees, and in the past, they have been growing 3%-4% per annum. And incidentally, when you have NII positive or rates positive, the float on the payment contribute to payments income. And all of the agreement we've done with Mastercard and that we're doing with other providers will underpin that. And I can continue, advisory and capital market. We've built a franchise.
We don't want to be an investment bank in the sense of Bank of America, but we do want to focus on our midcaps on that segment and provide superior service, because our competitors either do not reach them or do not have the capability. If you look at our IPO pipeline, it's off the charts at the moment in our clients. And so all of these things, in our opinion, will create a big counter, and so when we bounce back to what it was maybe 2019 with a normalization of rate, we're not gonna bounce back to where we were in 2019, but to a significantly higher run rate. So when I look at all of that and how the organization is now more united, more streamlined, and all of the above, I, I cannot see...
So can I see a reduction post 2024 in our net income? Yes, I can, but I think, valuation and share price on banks assume EUR 2 billion, EUR 3 billion, EUR 4 billion halving. I really struggle to see anything remotely close to that.
I was gonna say, please continue, because I think that was a powerful answer. I hope you've taken good note of that.
You're a financial institution analyst.
I'm gonna ask you, I'm gonna throw you a few questions on the Italian bank tax, because I think we have to talk about it. Well, how did you take it? What do you think was the impact?
... or what do you think will be the impact for the sector, for sentiment? Do you think banks will increase pass-through much more now? And we really believe this is a one-off, in your opinion.
Well, certainly lesson learned, and I think I make a lot of mistakes, but I learned my lesson. Speculating and anticipating what politicians, central bankers are gonna do is not a great trade. So I will not speculate. What I can say is facts. Facts, I think, the bank tax, you know, in terms of numbers, is not going to have a dislocating effect on the sector. It's not going to have a very meaningful effect on the sector. For us, we've said very clearly, our distribution are confirmed in excess of EUR 6.5 billion, and that's it. Secondly, I do think, however, that I need to acknowledge that the, let's say, the noise in the system from what governments, regulators, et cetera, are doing or thinking of doing creates uncertainty.
And as we all know, the real issue is uncertainty, and the credibility of a real issue is not any single measure. So I hope that sooner or later we'll have a clear path. That's my dream, and then we can execute on top of it. But I think the numbers of these things are usually taken out of context, and I think they are more than compensated by the multiples at which the sector is trading. So that's one thing. The second thing is, I think one thing that many maybe don't realize, we have all these debates on current account remuneration and everything else. Banks are not only about current account. We have current accounts, we have term deposits, we have money market, we have investment, we have assets under custody.
If a client wants to have a return on its money, they will swipe the money above a certain threshold that they need in their current account that is transactional and invest it at completely market rate. For Italy, it means BTP Italia, it means a lot of other things, certificates, et cetera, which are yielding all the way to the top. So then you come to current account. Current account is a service. You pay your bills with it, and you do all of these things. So what clients care about there is the fees you charge on those current account, and we have cut them. I mean, we have taken out EUR 240 million of fees from current, current accounts this year alone, and we were the first bank to do it.
If you have, why is Italy or other market better than others, in inverted commas? Fragmentation. If you look at the average mass market deposit in Italy, EUR 5,000. All of my retail, EUR 15,000. How much does one point do there? Not very much. You swipe, and you get two or three points more. How much does on a EUR 5,000, EUR 50 of account fees? The same as one point. We took them away. We're not having any issues with clients accepting large corporate or wealth, which in any case, have already moved on current account. We have issues on mortgages. Now, if you have EUR 250,000, that's where it bites when rates go from - 50 basis points to where they are today. You have it on consumer loans.
But that's why UniCredit per l'Italia and similar measures in Germany and Austria have elongated the time of mortgage to avoid the peak and allow people to spread it over time. So we have responded in this way. I'm just sad that people are only focusing on one thing all the time. The other thing is that we take as normal, in inverted commas, the last decade. Negative rates of - 50 basis points is not normal. Nowhere in the world is normal. We also say, why European bank cannot be as profitable as Americans? I've always worked in American banks, and I have all the respect, but in the last decade, they had positive rates. We had - 50 basis points. That means 60% of your P&L has been completely underwater.
Now, whatever is the rate, when we go to run rate, 2.5%, 2.75%, 3%, with inflation where it is, that's what you look at. We're gonna move to positive rate territory, and 60% of the P&L is gonna be in positive rate territory, with spreads which are similar to pre-financial crisis. That's what... That's the forest. So we may have a peak, but as we normalize, we have emerged 60% of our P&L in banking in Europe, and that's why you're seeing more resiliency than you think. The other thing that I would add is, because we had all the problems in Europe, I think most institutions have spent a decade grinding on NPEs, not growing. The vintage goes back to, in our case, five, six, seven years. We haven't grown anything.
When you look at those NPEs, they're not gonna react in the same way they reacted in the past because of that reason, but that's just my point of view.
Thanks. I guess we don't have to speculate for much longer because the Italian government will have to convert the tax proposal into a decree by October 9th . I think that's a few days to go. Let's go back to what I think we were talking about. I think everyone was enjoying your previous answers. I think I'm gonna throw you another one of those topics that you like, capital returns, which has been your bread and butter and key pillar of investment thesis, of course. I'm gonna ask you the same question I asked you on the Q2 call, which was somewhat provocative, but, you know, I think, factually, you're generating a ton of capital, a lot more than you can conceivably distribute.
Even sort of with the distribution you had announced so far, as it stands, you're still gonna end every year with quite a large stack of excess and growing. And you're currently paying 70% of your organic generation, which means you're accumulating excess capital. How should we think about distribution going forward?
... So first of all, let's talk about distribution. We look at it, or at least I look at it, in two ways: what is ordinary and organic, and what is extraordinary on the side. Excess capital is in the second category. The first category is, again, in my opinion, we all focus on net income payout, wrong metric. I can be a capital-heavy financial institution, and 50% payout is an astronomically high number, which eat into your capital, so you're distributing some of your capital, and that is not sustainable. Or I can be a completely capital light asset manager, and you can go to 80% or 90%, and your capital remains stable or goes up.
So the important point, and in my, in my view, the rule of thumb is after you're done with this with distribution year-over-year, is your capital flat, up, or down? If you're up or flat, you can afford it. If you're down, you're eating into your future. We're always up. That's the first rule that we have. The second thing is, I have an eye on what we can support. So although I told you what I told you, I have visibility on 2024, and I have visibility on 2025. I don't have visibility on 2026, 2027 and 2028. I would like to have distribution that are supportable at the level where I put them. At the moment, we think that EUR 6.5 billion, or in excess of EUR 6.5 billion, is supportable in the foreseeable future.
And we take also comfort that if we have some accident or dislocation in the meantime, we can always use the excess capital to underpin them. Given that we have not distributed excess capital, our distribution are only organic generation, we would just start to do what most of the other banks are already doing. So that, for me, is a buffer to keep the distribution and the stream over time. By the way, I don't want to. It's probably public by now, but we are all in this room, and just to mention that today, we are announcing that of the EUR 6 billion, or in excess of EUR 6.5 billion for 2023, we are anticipating or front-loading EUR 2.5 billion now. We are going to call an EGM for the October 27th, if I remember correctly.
We're gonna try, and then from then on, we're gonna anticipate EUR 2.5 billion of a EUR 6.5 billion distribution. So if it was in excess of EUR 6.5 billion next year, now it's gonna be in excess of EUR 4 billion, and EUR 2.5 billion, we're doing that. Why are we doing it now? I think it's just to give a signal that, you know, I don't want to hold our capital to an extent that is out of here. Secondly, it has a potential positive impact on DPS and on EPS as we take out shares ahead of the dividend and ahead of the starting of next year, and frankly, we can afford it. So this is ordinary. And obviously, for next year, we remain in excess of EUR 4 billion.
It can be EUR 4 billion, it can be more, it depends on the results. The extraordinary, I said at the beginning what it was, but then I have iterated a little bit, now. But fundamentally, the first use was, if there are accidents, we have a buffer. There is no panic. For us, it was Russia. We didn't hesitate a second to take the hard hit in one quarter. Very few people could do that, but we could because we have this pot on the side. There have been other accidents on the way. Hopefully, there won't be others, but we're always quite comfortable because we have that, for now. But I hope Europe starts stabilizing at some point, and we will have more visibility. Second, second possibility is we find, inorganic opportunities, and we have had a lot of noise on that.
And in a way, the noise is reasonable because we look at many things. But I think we have demonstrated over the last almost two and a half years that if the terms are not right, we won't move, and we won't move. So if people are betting on what target UniCredit looked at, and let me write it up, because at the end of the day, they're gonna come and pay that. They're gonna have a very rude awakening because we're not gonna move. And at the moment, unfortunately or fortunately, buying my stock at 5.5x versus doing an acquisition with execution risk at 8x or 9x is a no-brainer. My job is not to go for an ego trip. My job is to generate the maximum value for investors over the long time. That's my job.
That is another thing, but I hope that with the dislocation, the uncertainty and this cycle and everything else, at some point we will be able to do some bolt-on in core markets, primarily in the CE or other places, and that it opens up. If they open up, we will move. If not, we won't. Third use of things, which is the most likely at this point, is returning it to shareholders. Really, given that our ordinary distribution are already quite high in terms of market cap, we are at a 16%-17% yield, it doesn't seem to have much effect on the rest. Going to 2021 doesn't really seem to be the right thing to do.
What I think is better is, over time being, we can hold organically 2024, no issue, and based on what we know today, 2025, no issue, because of the organic capital generation we anticipate. But as we move into 2026, 2027, 2028, if there were to be blips down and we still have excess capital, we would be underpinning it to at least maintain the distribution where we are. The last thing that I usually say is, at the moment, obviously, our distribution are tilted to share buybacks, because I think that at this valuation, it's a no-brainer. It's an investment in the future... but gradually, we're going to increase the percentage of dividend payout and increase the cash distribution, which, you know, it will be- this will be, in my opinion, what our investor base require.
Our current investment base is very keen that we maximize the share buyback, but if investor base tilts and we understand we need to improve the dividend part of the equation, we will improve the dividend part of the equation. That, I don't have an issue on that. Where, where I have an issue is, so that we're all clear how I think about things, is to go with a 100% dividend. I think you hamstring yourself, and then some decisions are taken because I cannot not pay, because last year I paid. I think having share buyback gives you an excess capital, a little bit, not the amount I have today, gives you operational and strategic flexibility. There is nothing I will not do this year to invest in the future because, oh my God, I may not get to the dividend. There is nothing.
If I need to do more integration costs to defend the cost base in 2024 and 2025, plenty to do, because it's the share buyback that is buffering, not the dividend. So I think it is good discipline to keep one part that is less religious than the dividend is, but that does not mean we need to remain at 35% distribution.
That's great. We've got about just less than 15 minutes left. I think it's been a vibrant session. We can allow plenty of time for Q&A. Before we do that, you're a pan-European bank, you oversee a number of countries in Europe. I think it's interesting for everyone to understand what you're seeing from your clients, both retail as well as corporate. You've alluded sort of to Q3, you'll give us an update on the payments business. How's Q3 looking so far, to the extent you can comment and give us some more color?
I can't comment much, but I can give you guidance. First of all, when we look at lending volume, and if I exclude from the dynamic, you're gonna see in our results of the, let's say, upgrading or improvement of the back book in terms of profitability, which obviously weighs on volume for the moment, it still does. We're seeing good growth in short-dated lending. Consumer, really good growth. It's not abating in almost all the countries. I would say that when you look at medium term, especially corporate, you see decline. Not big decline, but decline. I think that also for corporate, there is a tendency to use to the maximum your cash balances to... for your working capital, as opposed to go and borrow outside. It's obvious. But nothing, let's call it, dramatic.
Just, you know, people are becoming more effective and more efficient in, in weighing what they're doing. It is true, unless there are structural programs from government or things like that, corporates are kind of waiting and seeing for big investments until they have a better idea on what's gonna happen. Obviously, this is an average. We see good growth in Eastern Europe, good growth in the part of Central Europe that exclude Austria, and Italy, Germany, and Austria are slower. That's on the lending side. On the deposit side, I think, fundamentally relatively stable with, with some, some reductions. I mean, the corporates are tending to stabilize, and, I think even in Italy, we see some of a retail deposit. Goes to show what I was saying, moving from current to asset under custody.
In a way, it's adjusting to the right level. That is not bad, because it means that when we stabilize and things are clearer, I think those assets under custody are already in our perimeter and tend to then move into asset management, unit-linked, and things like that. That's fundamentally what it is. Cost of risk, I'm not gonna reiterate what everybody says. As of today, it doesn't blip. There, nothing. I think it's rearview mirror vis-a-vis looking forward. Rearview mirror and actual today, day after day, very benign, very benign. In terms of looking forward, we're not letting our guards down. That's why I was initially thinking that we would start releasing overlays this year.
And instead, with a cost of risk that, with the write backs we're getting is in below 10 basis points, we are probably going to look if there are other places where we should be more conservative to anticipate, keep the overlays and keep the guard up, be more... be as selective on credit as we have been so far. And so if the cycle, actually, when the cycle become worse, we are plenty covered, and we have overlays on top, and we don't have bad surprises. So that, that I think is where we are.
That's great. Plenty of color. I think a great time to sort of open up for any questions you might have. I'm gonna ask you to please, if you have any questions, raise your hand, wait for the mic, and state clearly your name and company you work for. There's one question there. If you can bring the mic to that gentleman there in the corner.
I find a big disconnect in the valuation, the way the sell side looks at it. There's pre-excess capital, post-excess capital, and as you look out to 2025, 2026, your share count's going down, so the X excess capital valuation gets-
...somewhat in the two-three handle.
How, how do you look at the valuation on a x-axis capital or?
Well, I think, put it this way, in just numbers, and if I take consensus numbers from a little bit everybody, I think people go around saying that the average multiple, earnings multiple, because that's what they look more than capital at this point, of a sector is 6.2x, we're well below 6x. Now, that's one way of looking at it. The other thing is, if you look at it on a book value multiple, or if you look at valuations, et cetera, et cetera, when we are well below 6x, it is valuing my excess capital to 13 at zero. Because otherwise I would need to take my market cap, take the excess capital to 13 out, and then look at that market cap, how much are my earnings valued? Then I get into four, right?
So you can look at it like that. Why is that? I'm not venturing, but, but I do think that, all we can do, and all I have to focus on, and the team is focused on, is one, deliver, deliver, deliver, deliver, and make it extremely expensive to people who do not believe we can deliver. And that's what we're doing. And in doing that, I think, what UniCredit has done a good job at, at the moment, and the team has done a very good job at, is for us, 2024 is done. For us, all of August, we're looking at 2025 and 2026. Because at the end of the day, when we get to the end of 2023, 2024 is done, plus, minus. Okay? You have done your integration cost.
The people that need to exit or the cost you need to reduce are gonna percolate into your P&L during 2024. You're either done it or you're late. And the same thing, if you look at your loan book, it is what it is. The rates are what they are. The pass-through is gonna be what it's gonna be. Yes, the execution is critical, but if you trust your team, they're gonna execute well. So 2024 is less, is critical for the team in the trenches. For us, 2025 and 2026, how do we ensure we can maintain that further down the line? And so that's what we do. And I think, and we try to interpret what investors want, and if it is also in the best interest of the bank, we're trying to give it all in that direction.
I do know that excess capital is an issue. For the time being, it has helped us. I also do know, and I said it the first day with UniCredit Unlocked, if I'm arriving at the end of 2024 and I still have EUR 9 billion or EUR 10 billion of excess capital or more, and I don't have a clear solution for it, or a clear guidance on how it's going to start converging down, I told people that they can, they can tell me I lied at the end of 2021. I have to get to that. Obviously, in the meantime, we've had the war, we've had this, and we've had that, and that has put us a little bit more, let's say, conservative on the way we're looking at it.
2024 will be the year where we need to not only say, "This is options," we are gonna say, "Given where we are, that's where we are. This capital is going here over this period of time." I think you need to expect that from us, and we will do it as soon as we get a little bit more visibility onto 2025 and 2026.
Thank you. Next question, please. In the middle here. I think it's coming.
Morning. Thank you. Can you help me understand, please, the unit cost economics of being multi-geography from a platform perspective? Are there genuinely scale benefits which you leap across the group, or is everything built in every country?
So that is the key question of why we exist. Does a pan-European bank in a European Union, that does not have a banking union and does not have a capital market union, make any sense, right? I think that the general theoretical answer was, you're gonna be two things, or were, you were accepted to be two things: an absolute leader in the market where you are, or an absolute leader with investment banking or global business outside. But pan-European, it works in the U.S., obviously, but it doesn't work, it didn't work here. I think there are some things that exist even if you're not unified. Trade finance and payments is the biggest one. So if you look at my average market share in the markets, where we are 11%-12%. If you look at our market share in trade finance, over 20%.
Because obviously, all of the mid-caps go through our triangles one way or the other. The second thing is that market share is more profitable. You do a payment. A normal bank will do a payment, and then there is a correspondent bank, and we split it in the middle. I don't split it in the middle. The correspondent bank is me. And so I have end-to-end, and this is very capital light. You have a lot of things you attach, because, by the way, when you do that, you're not competing for FX, commodity hedging, various insurance product to ensure your delivery, et cetera, et cetera, et cetera. That is an engine that we have, that banks that do not have banks in all the other countries.
We look a lot at flows between Italy and Germany, Germany and Czech, Austria and Croatia, because these are where we can lock in very profitable business. Trade and finan- trade, what we call client risk management, which are all the, the, the hedges and payments. Then you have a second thing, which wasn't that clear at the beginning. It was relatively clear to me, and those are what we call the factors.... You know, if I want to hire this gentleman who works for Bank of America to come and work for me, and I have the leading Austrian bank, the leading German bank, what am I going to offer the gentleman? I'm going to offer Germany. If you come at UniCredit, I offer Europe, and I have a lock-in on SMEs across 13 markets. I actually have better access than any other investment bank.
Now, I need to mine that access. That's another story, but I have better access. The access is not top-notch large corporate, it's SMEs, because in the top-notch, investment bank reach. In the SMEs, they don't. In the SMEs, my regional counterparties compete with me, but they cannot have a factory attracting the talent I can, I can attract and supporting the scale I can have, because I can spread it on 13 economies. All the factories. When I go to, you know, the contract Mastercard has done with us is unique. Nobody else has that. The contract we have done with other providers is unique because they see the same advantage. They do one contract, and they get critical mass in 13 markets in one go. Procurement factories are definitely a big, big advantage.
Then there is another one that is difficult, but we're seeing green shoots about. So obviously, if I have one bank in one market, I have one-to-one scale in technology. I have one-to-one scale in operations. If I am in 13, it used to be at UniCredit, you have 13 ITs, 13 operation, no scale. We have scale now. Now, do we have a one-to-one scale? No, we don't. Can you get to 70%, 75% of that number with a common architecture, with common platform, with, for example, putting some of your operations, not in places where we're not, in places where we are. I can put operations in Romania and Poland. I'm there, I have a bank, I'm a leader. I can also concentrate operation there for the entire group.
So, and I think that with the movement of technology, the platform advantage is gonna increase, not decrease. I mean, I think that what we're doing now in terms of putting to common denominator when cloud did not exist, hard. With cloud, a lot easier. So the issue for us is, if you look at companies like Amazon, et cetera, they have that, but obviously they started from zero. We don't start from zero, we start from legacy. So we need to move that legacy onto a common. That takes time, but the principle is exactly the same. So I do think there is a value. Obviously, if somebody, blesses me and we have banking union, then it's off the charts.
But for the time being, I think the other proof that I ask my team is, okay, so there are synergies, but if you want to avoid and eliminate any conversation about, "Well, why are you in this place, and its complexity, and why the hell are you doing that?" You need to be best in class in terms of a key KPI of revenue growth, efficiency in cost, efficiency in capital and profitability. If you are that, and you absorb your share of the corporate center, then nobody can tell me that maybe you're doing it because you are working better than your peers and you're compensating in efficiency, but nobody can tell me why the hell are you there and you're not adding any value, because we are.
So I think that's the way we look at it, and as we move and we get more together, the combination of telling people, "You have a client, you have a local wisdom, the decision is yours, you're empowered," but we have one strategy, we have one framework, we have one risk metric, we have one compliance metric. We're gonna converge technology. You're giving me all your factories because I'm putting them to a common denominator, and these people are going in my—all my 13 countries. That, for us, is almost a conversion of a European Union-type bank, and I think it's working at the moment.
Thanks for that. I think it was a great answer, actually. And, well, the 45 minutes are up, so I think we've learned, well, a lot for today. So thank you, Andrea, for taking the time to join us.
Thank you, everyone.
Thank you, everyone.
Thank you.