Banks in the game and politics in the stands

Luigi Lovaglio’s desperate yet creative attempt to secure a future for himself, even before doing so for MPS, by first presenting an alternative to Intesa Sanpaolo’s bid to the board and then to the general meeting, represents a piece of a larger jigsaw puzzle, within which one can reflect not only on the fate of the Italian financial sector but also on the state of relations between banks and politics. The next moves in this game of ‘Risiko’ still need to be analysed and assessed, and surprises are still possible. Lovaglio, as you know, has for some time been exploring other avenues to prevent Intesa Sanpaolo’s bid from succeeding. Yesterday, during a marathon board meeting, he put forward two specific proposals: an exchange offer for Banco BPM and an exchange offer for Banca Generali (Alberto Nagel, the former CEO of Mediobanca, also played the Banca Generali card when he tried to save himself at the last minute from the MPS takeover bid: it did not go well for him). It will now be up to the MPS shareholders’ meeting to authorise the counter-move, and then for the market to judge whether it is more attractive than Carlo Messina’s bid, which at the moment still seems to have a better chance of being accepted (Intesa has already put 36 billion on the table, with a concrete and easily quantifiable offer). To beat it, MPS must do two things simultaneously: pay BPM or Banca Generali enough to convince them and, at the same time, not short-change its own shareholders; the more it offers to the others, the less it can leave for its own: this is what makes Lovaglio’s manoeuvre much more difficult).

The intersection between the movements of the banks and those of politics has once again, in recent hours, set the imaginations of many observers alight. Yesterday, "La Repubblica" put forward a theory that was as precise as it was reckless: Meloni is said to be in agreement with Lovaglio to prevent both Intesa Sanpaolo from gaining too much power in the political game of "Risiko" and the PD from building its election campaign in Tuscany by capitalising on the MPS debacle. The second issue is certainly a real one: within Fratelli d’Italia, this possibility is a cause for concern (Giorgia Meloni herself, a few days ago, made it known that she hoped the world’s oldest bank would not be broken up and would continue to exist – though this is different from wanting to oppose Intesa’s operation). The first argument, however, is more tenuous. And not because there is a lack of people within the government who envisage different alternatives for MPS, such as Giorgia Meloni’s chief of staff, Gaetano Caputi, who is close to Vittorio Grilli, chairman of Mediobanca, who in turn is close to Luigi Lovaglio, CEO of MPS. But because, in this second phase of the banking game of Risk, the market is infinitely stronger than politics. And, however numerous the government’s objectives may be – in this specific case, Caputi’s agenda does not coincide with Meloni’s: according to Il Foglio, Messina made his moves regarding MPS after discussing them with the Prime Minister – politics does not have sufficient tools to impose itself on the market. Over time, the various political figures within the government who have worked and championed the cause to achieve certain results have discovered a rather interesting paradox: the more politics gives up on building the bank it desires from the drawing board, the more the market can deliver a solution that aligns closely with its objectives. The Minister for the Economy, as is well known, has for years dreamt of a third major Italian banking group and, having done everything in his power to promote it, now finds himself facing a curious scenario. The entity that could help the political sphere reduce French influence in Banco BPM is precisely the bank that it has long opposed: UniCredit.

As for the third financial hub envisaged by Giorgetti, for there to be any chance that MPS – the bank that politicians helped to rescue – might become its linchpin, the minister must hope that the market takes its course. The only way forward is for Lovaglio to succeed in convincing shareholders of the merits of one of his alternative proposals. In recent months, the political establishment has also pursued another explicit objective: to have slightly fewer foreign shareholders and slightly more Italian shareholders in the banking sector. As you will recall, it intervened by imposing certain restrictions on UniCredit’s bid for Banco BPM. In doing so, it believed it could easily manage one of BPM’s major foreign shareholders, namely Crédit Agricole. Over time, however, it has realised that the strategy has not worked and today, from the sidelines, it is hoping that the market will pull its chestnuts out of the fire, finding a way to reduce the French bank’s influence: either through UniCredit on the one hand or through MPS on the other.

Amidst the shifting dynamics of the banking sector, there is one key player: Generali. When it comes to Generali, politicians would probably be willing to use their power of veto to block unwelcome transactions – see the entry on ‘golden power’. But at the moment, rather than being a key player, they are an interested observer from the sidelines, making it clear to all parties that, whatever the outcome of the political manoeuvring and jostling, Palazzo Chigi and the Ministry of the Economy are perfectly aligned on one point: whatever the final shareholding structure of Generali may be, the public company model – with several strong shareholders but no single dominant player, such as Intesa Sanpaolo, UniCredit and Caltagirone, and with Delfin potentially exiting the fray in the short term – is preferable to a one-man show.

To claim that political parties have no stake in the banking game is, of course, hypocritical. Politics can obstruct, slow things down, impose conditions, levy taxes and exercise the ‘golden power’. But to suggest that political parties currently possess sufficient power within the banking game to steer competition as they see fit is simply untrue. For years, as a former banker with a sense of humour recounts, Italian banks have been portrayed as ailing institutions in need of treatment, institutions to be protected, powers to be monitored, and cash machines to be taxed. "Risiko" reveals a different Italy. Italian banks are buying up assets, defending themselves, generating capital, attempting European deals, attracting foreign capital and forcing politicians to stand by and watch. And the fact that, even in a country crammed full of political parties eager to intervene in the banking sector, the market is stronger than politics is news that may put politicians in a bad mood, but which should put Italy in a good one.