Tue. May 24th, 2022

Italy runs the risk of failing in its ambition to become a more “business-friendly” economy unless it continues with major structural reforms, one of the country’s top bankers warned.

Alberto Nagel, CEO of investment bank Mediobanca, said it was essential that competition, civil justice and public administration reforms be completed.

The 56-year-old, credited with modernizing a bank that has been a power broker for Italy’s financial and business elite for decades, also urged the government not to squander the € 200 billion EU-backed fund it designs is to help the eurozone’s third largest economy. recovery from the pandemic.

“A key priority for Italy is to spend the funds well, avoid risks of increasing statism and, on the contrary, favor an ecosystem that should become truly business-friendly,” Nagel told the Financial Times.

“[The recovery fund] can be a game changer in terms of additional expected [economic] growth, which is especially important for a country with a lot of debt, ”he added.

The warning comes as Italian lawmakers prepare to vote in a presidential election this week, with divisions threatening Prime Minister Mario Draghi’s chances of succeeding outgoing President Sergio Mattarella.

Nagel says that Draghi, who has been prime minister since early last year, has the best hope of bringing about reforms.

“It is clear that the best assurance that this can happen is that Mario Draghi will remain in a top institutional role for a number of years,” he said of the former head of the European Central Bank who, if elected to president, would have a mandate of seven years.

Nagel’s prescription for Italy’s economy comes as Mediobanca is locked in a power struggle with billionaire entrepreneur Leonardo Del Vecchio, a major investor in both the bank and Generali, Italy’s largest insurer.

Del Vecchio believes the Milan-based bank is relying on too much of its profits for a 13 per cent stake it holds in Generali. This is a claim that Nagel, who has led Mediobanca since 2013, is quickly pushing back.

“As far as Mediobanca is concerned, the Generali investment makes a significant contribution to our financial targets and has a return that is clearly higher than our cost of equity,” he said.

Del Vecchio and construction magnate Francesco Gaetano Caltagirone, another Generali investor who recently left his board, are urging a boost in strategy at the insurer and the departure of CEO Philippe Donnet.

Management at Generali is also a point of contention between Mediobanca and Del Vecchio and Caltagirone. The pair argue that the insurer’s retiring board should not be allowed to recommend their successors to shareholders ahead of the group’s annual general meeting in April – a plan that Italy’s financial regulator, Consob, gave the green light to last week.

The dispute is one of several that have flared up in recent months that have tested how Italian corporate governance handles the demands of minority shareholders as well as those of the state.

“At the moment there are a number of important [decisions looming] it will be a test for the maturity of Italian capitalism, ”Nagel said. “Italy must catch up with management practices favored by international [markets] to make the country more attractive for investment, ”he added.

Until just three years ago, there was a formal agreement between some of Mediobanca’s influential minority investors that gave them effective control over the borrower.

Despite the unrest over Generali, Nagel says he is focused on the future of Mediobanca, which for much of its 76-year history has acquired business from a variety of Italian family-owned companies that held interests in the bank, including tire manufacturer Pirelli and construction. group Italcementi.

Over the past 10 years, Mediobanca has cut back its cross-stakeholding, yielding around € 5 billion in returns. Institutional investors now make up more than 45 percent of its shareholder base, with much of the rest owned by individuals. Del Vecchio recently became the bank’s largest single shareholder with a 19.4 percent stake.

Nagel tried to diversify the bank’s businesses by developing a wealth management division, which he said played a key role in driving revenue to a record high of € 2.6 billion last year and raising fee income.

Amid the change at Mediobanca over the past decade, Nagel shares a zeal to keep the bench out of the spotlight that has long been associated with his co-founder and driving force Enrico Cuccia.

“We are confident that our sober approach is still the best choice in today’s world,” Nagel said.

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