"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 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.

($1 = 0.9151 euros)

(Reporting by Valentina Za;Editing by Gianluca Semeraro, Louise Heavens, David Goodman and Emelia Sithole-Matarise)