Intesa Sanpaolo chief slams EU over Italy’s struggles

Carlo Messina blames ECB and Brussels antitrust authorities for recent financial woes

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Carlo Messina, chief executive of Intesa Sanpaolo, said Italy’s biggest domestic lender was in talks with asset manager Prelios about a deal that would reduce soured loans — a European regulatory priority — and warned the European Central Bank to dial down its pressure on Italy’s banks. The comments from Italy’s highest-profile banker in an interview with the Financial Times reflect the tightrope Italian bankers must walk between European regulatory demands and political pressures at home, where hostility to bankers is among the factors fuelling support for populism. Mr Messina also said Intesa Sanpaolo, one of Europe’s biggest banks by market value, was unlikely to be involved in an expected M&A round among the continent’s large lenders. “I do not think Intesa Sanpaolo will enter into European consolidation,” he said, adding that the bank’s analysis showed “synergies are really very limited” from a cross-border merger. He said the bank would continue to hit its revenue, profit and dividend targets. Mr Messina’s position stands in contrast to the bank’s Milan-based rival UniCredit, whose chief executive Jean-Pierre Mustier has sought a deal with France’s Société Générale or Germany’s Commerzbank, according to people close to him. The real priority is we need to invest in these social issues or else we will not have a future Carlo Messina Italian banks have been on the front line of tensions between Italy and Europe not only over bad loans run up during the European debt crisis but also over Italy’s expansionary budget. Investor jitters over the package caused spreads on sovereign debt to balloon last year, reviving fears of a vicious cycle between banks and the sovereign. Mr Messina said Intesa Sanpaolo had a “clear target” to hasten the reduction of “unlikely to pay” debt, the new focus for EU supervisors, at no cost to its shareholders. He said the talks with Prelios were about a deal to accelerate the clean-up. Financiers argue that a decisive move by Intesa Sanpaolo would kick-start Italy’s €80bn UTP market. Intesa Sanpaolo had €25.5bn of net non-performing loans at the end of 2017, split almost equally between bad loans and UTP loans. The bank has more than halved its stock of net bad loans in the past two years so the next logical focus is the UTP. On Rome, Mr Messina said official data showing the number of Italians living in absolute poverty had risen to 7 per cent of the population proved the government was right to make “a clear priority the social situation of the country”. “The real priority is we need to invest in these social issues or else we will not have a future,” he said. Intesa Sanpaolo increased donations to anti-poverty and social initiatives in the past year. He saved his sharpest criticism for EU authorities. Overly-demanding targets given by the ECB to cut bad loans were “a mistake, also from a social point of view”, he said. He also criticised EU antitrust authorities for their “incredible mistake” in a state aid ruling five years ago that is widely seen in Italy as having worsened its banking crisis.

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The EU’s top court this month overthrew Brussels’ 2014 ruling that the use of the deposit guarantee scheme to rescue Italian bank Tercas amounted to state aid. That forced Italy’s government and bank bosses to scramble for other solutions to solve crises at a further 10 banks. These involved losses for retail investors at Monte dei Paschi di Siena and two large banks in the Veneto region, which have fanned anti-banker rage. “That was the starting point of a nightmare in terms of a managing a crisis situation,” Mr Messina said. He also backed the government’s pledge to give €1.5bn to retail investors who lost money in the banking crisis, saying “the EU needs to accept that there has to be a reimbursement”. Mr Messina expected Italy’s economy, which went into technical recession at the end of 2018, to pick up in the second half of this year as companies start investing again after European parliamentary elections in May. But he argued the government must cut the country’s ballooning national debt, which stands at €2.5tn, and urges securities to be issued against the sale of state real estate to tap the vast savings of Italian families. He also played down attacks by the government on the Bank of Italy for its role in the country’s banking crisis, arguing he was “not convinced” Rome was “against these institutions”, and pointed to the stabilising influence on the government of President Sergio Mattarella. “In any case we have Mattarella who is the real point of equilibrium in the country.” Regarding Italy’s decision last month to sign up to China’s controversial Belt and Road Initiative, Mr Messina said Intesa Sanpaolo had struck an agreement that could lead to it opening a securities house and private banking business in China. “But in terms of security,” he said, “Italy’s place is with the US and NATO.”

 

 

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