Can the spirit of Mediobanca’s Cuccia survive Italy’s crisis?


Dominic O’Neill
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Italy’s banking crisis might move Mediobanca ever further away from its past as the country’s corporate gatekeeper. But its merchant banking legacy still gives it valuable links and a clubby prestige cherished by clients and shareholders.


The cloistered and silent corridors of Mediobanca’s Milan headquarters, in a former monastery behind La Scala, are a world away from the busy lifts of the nearby UniCredit skyscraper.

Italy’s banking crisis, however, will push Mediobanca further from a past when it used a web of equity stakes to pull corporate strings. Under Enrico Cuccia, who died almost 20 years ago, Mediobanca helped Italian businessmen free up capital while retaining control during the post-war boom years. It became a defender of the local business establishment it epitomized, consolidating its power during the privatizations of the 1980s and 1990s.

While Alberto Nagel has been at the helm – he became chief executive in 2008 and was co-head before that – he has put more emphasis on consumer finance and wealth management, opening branches of the investment bank across Europe and launching online bank CheBanca!. 

More recently, higher capital charges on equity stakes under Basel II and the travails of firms like Telecom Italia have added impetus to Nagel’s sales of the shareholdings. 

Mediobanca has offloaded around €2 billion of these stakes since 2013. 

“As we are modifying our business model, it follows that our shareholder structure and governance are evolving with the growth of institutional investors and a board with a majority of independent directors,” Nagel tells Euromoney, in a room with Latin inscriptions and black-and-white photographs of the founders. 

Core shareholders

Today, Mediobanca’s core shareholders own about one third of it. Italy’s biggest companies have had to turn to foreign capital, ending cosy arrangements. ChemChina bought Pirelli in 2015, for example, and in January, the tyre manufacturer sold its 1.79% stake in Mediobanca. 

UniCredit is still Mediobanca’s biggest shareholder, with 8.43%. For former UniCredit chief executive Alessandro Profumo, it was a means to bolster his own modernizing influence over Italy’s financial quadrumvirate, which also includes Intesa Sanpaolo and Generali. Mediobanca was and will remain the biggest shareholder in Italy’s biggest insurer.

Lately Italy’s banking crisis has increased the role of foreign management and capital at UniCredit too, with Jean Pierre Mustier becoming UniCredit’s chief executive in mid 2016. Mustier apparently supports Nagel’s strategy – understandably, as it might enable a capital-enhancing exit. 

The Frenchman sees the stake as a financial investment to a greater extent than his predecessors. That Mustier has not sold already might reflect the fact that Mediobanca trades at a discount to book value, although the shares have doubled in price while he has been chief.

Though consumer finance makes up the biggest chunk of Mediobanca’s revenues, Nagel has up to 200 basis points of common equity tier-1 to spend on acquisitions before the end of 2019 and has prioritized asset gathering, both product providers and distributors. 

The bank bought Barclays’ Italian retail business in 2016, doubling CheBanca!’s size. Last year it bought the 50% it did not own in Banca Esperia, a private banking joint venture with Mediolanum. Rebranding as Mediobanca Private Banking will emphasize the tie-in with the investment bank – and the allure of Mediobanca’s history.

Can Mediobanca retain its investment banking stature as the shareholdings fall? In Italian equity capital markets, Mediobanca is consistently top, according to Dealogic. It was a top-three player in Italian M&A last year and has a reputation for forging deals other banks later join. Nagel has an encyclopedic knowledge of the Italian corporate landscape. In a country as complex as Italy, you want someone like this on your side. 

Obvious link

Even if the now thinner web of shareholdings does not prevent rivals getting mandates, it surely helps the bank stay close to clients. In winning the mandate to advise the Italian side of the €48 billion merger of eyewear firms Luxottica and Essilor, for example, Leonardo Del Vecchio’s 3.16% stake in Generali offered a link between Mediobanca and the Luxottica founder (as an interesting parallel, Rothschild’s chief executive, Olivier Pécoux, has a seat on the board of France’s Essilor, which was advised by Rothschild). 

There is an even more obvious link to Mediobanca’s work with Atlantia on the Italian toll-road operator’s €16 billion bid for Spanish rival Albertis. Co-head of corporate and investment banking Francisco Bachiller is a former Morgan Stanley banker and knows the Spanish market exceptionally well. Mediobanca had the added benefit of ownership until late 2017 of a 1.76% stake in Atlantia alongside the controlling interest of the Benetton family, which is also one of Mediobanca’s largest shareholders. 

Nagel says he will cut the Generali stake, which makes up more than three quarters of his €3.5 billion equity portfolio, although only from 13% to 10%. He says the stake offers diversification: “The Generali stake has played a role in the stability of our revenues, something which has helped us avoid raising capital in 20 years.” 

Even if the shares are not well-valued, Mediobanca may well sell the entire stake if it finds a good alternative for the capital.

Yet there may be another, more European way in which Cuccia’s spirit lives on: through Vincent Bolloré, chairman of French media group Vivendi, whose daughter Marie sits on Mediobanca’s board. A renowned corporate power broker in France and increasingly Italy, Bolloré is tightening his grip on Telecom Italia (lately sold by Mediobanca) and has a 28.8% stake in Mediaset, Silvio Berlusconi’s television company. 

Bolloré increased his shareholding in Mediobanca to 7.91% earlier this decade, at one point calling Mediobanca and Generali “control towers of the Italian economy”. Generali chief executive of the last two years, Philippe Donnet, was previously a Vivendi board member. Donnet may be his own man – and Intesa Sanpaolo’s flirtation last year with a Generali takeover came to nothing – but it seems the Bolloré group will be keen for Mediobanca to keep its grip on the insurer.