When Mediobanca said in June that it planned to put most of its stakes in other companies up for sale and become a “normal” bank, critics of crony capitalism cheered. For decades the Italian investment bank has sat at the centre of a web of cross-shareholdings, shareholder pacts and nested stakes that has allowed a small group of banks, big companies and rich families to control the destinies of many of Italy’s most important firms. Although some claim that the system in its day made it possible to rescue troubled companies and protect businesses from predators and politicians, more blame it for embedding bad management and weak capitalisation.
In September Mediobanca cut its holding in Telco, which controls Telecom Italia, from 11.6% to 7.3%. It said in October that Generali, an insurer of which it is the largest shareholder, would sell its reciprocal 2% stake in Mediobanca and leave the bank’s shareholder pact. Other pacts, such as that which controls RCS MediaGroup, owner ofCorriere della Sera, Italy’s leading newspaper, are being dissolved. And on December 16th Generali sold its stake in Pirelli, a tyremaker.
Mediobanca’s boss, Alberto Nagel, argues that “there is an overall push now to wind down shareholder pacts and place shares in the market.” But his bank has yet to keep a promise to cut its 13% stake in Generali to 10%. And if the system is changing, it is mainly because the money to keep it going is no longer there. Firms are scrambling for profits in Italy’s worst recession in living memory. Many legacy shareholdings have proved disastrous investments. When Mediobanca marked such stakes to market last summer, it recorded a €400m ($550m) loss. New prudential regulations will penalise banks more severely for holding equities.
Some argue that the changes are too timid and too late. Matteo Arpe was hailed as Italy’s most successful banker when he turned around Capitalia between 2002 and 2007 (when it was bought by a larger bank). But he was forced out by the old establishment. Then, with his new investment firm, Sator, he lost two bitter battles for control of other big institutions. Convinced that there is no genuine appetite for change among the elite at the heart of the system, he has turned to backing medium-sized firms.
The views of Andrea Bonomi, boss of Investindustrial, another investment firm, and Mr Arpe’s successful opponent in the fight over Banca Popolare di Milano in 2011, are eerily similar. “We repaired the bank’s balance-sheet and fought the system tooth and nail on governance,” he says, “but the system fought back.” In November Mr Bonomi said he was resigning as its chairman.
Things look no brighter at Monte dei Paschi di Siena, a bank kept afloat by state aid. On December 28th a €3 billion rights issue planned for January to forestall nationalisation was booted into mid- 2014 by a foundation that controls a third of its shares and would rather sell than cough up or be diluted. Italy’s bad old business ways are far from over.
Source: The Economist