The Week in Breakingviews: Italy’s bank soap opera
BREAKINGVIEWS-The Week in Breakingviews: Italy’s bank soap opera The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Peter Thal Larsen
LONDON, June 14 (Reuters Breakingviews) - Welcome back! After months of hype, SpaceX SPCX.O shares finally started trading. Now we can turn our attention to the World Cup. I’m supporting the Netherlands, more in hope than expectation. Tell me who you think will win, and why. (If this newsletter was forwarded to you, sign up here to get it in your inbox every weekend.)
OPENING LINE
“Last month, Ukraine’s defence ministry announced that the country would all but cease sending its military personnel abroad for training. Kyiv’s reasoning was simple: after over four years of resistance to Russia’s full-scale invasion, the modern warfare experience of its own soldiers is superior to that of most of its allies.”
Read more: Ukraine can help Europe rearm, and its own economy.
FIVE THINGS I LEARNED FROM BREAKINGVIEWS THIS WEEK
Two-thirds of the companies listing on the U.S. stock market so far this year are loss-making. (Still more to come)
The cost of insuring Irish government debt against default is near a 10-year low. (What about tech jobs)
At least 46 Chinese robotics companies are waiting to IPO in Hong Kong. (Margins are under pressure)
China’s WuXi AppTec is involved in the production of a quarter of medicines used in the U.S. (Not for much longer)
Half of Japan’s listed companies will hold their annual general meetings in June. (Time to spread out)
UNDER THE TUSCAN FUN
Anyone who believes banking has become boring should spend some time in Italy. In the past 18 months the country whose Renaissance benches provided the word for “bank” has served up a made-for-Netflix melodrama of takeovers, boardroom battles and squabbling shareholders. Apart from the entertainment value, there are good reasons for everyone else to pay attention.
First, a quick recap of the plot so far: In January last year Banca Monte dei Paschi di Siena BMPS.MI, a bailed-out lender usually described as the world’s oldest bank, launched an improbable €13 billion hostile takeover bid for Mediobanca. Even more improbably, MPS boss Luigi Lovaglio succeeded in taking control of the venerable Milanese merchant bank and its 13% stake in Generali, Italy’s largest insurer.
The glow of victory quickly faded as Lovaglio fell out with his supporters. In March this year the MPS board excluded him from a shortlist of candidates to run the enlarged bank, effectively removing the architect of the Mediobanca takeover from the crucial task of overseeing the integration. In April, however, Lovaglio staged an unlikely comeback after investors voted to reinstate him – against the wishes of Italian powerbrokers.
Now Intesa Sanpaolo ISP.MI has further complicated matters. On Monday Italy’s largest bank launched a €31 billion offer for MPS with a promise to carve up the newly enlarged institution. Intesa boss Carlo Messina plans to keep Mediobanca and some of the MPS branches, while selling the rest to another Italian lender. What happens next is unclear. As Neil Unmack argues, the best bet for MPS is to hold out for a higher offer. Yet attracting another bidder such as rival lender UniCredit looks tricky.
It’s tempting to write this off as a feature of Italy’s byzantine banking industry, where executives, investors and government officials are locked in a never-ending struggle over the levers of financial power. Yet there are two broader takeaways. The first is that European finance remains trapped by national borders. Until this week, most observers had assumed Intesa was too large to make any more acquisitions in its home country. The fact that Messina is attempting another domestic deal is an implicit acknowledgement of the dearth of available targets elsewhere. UniCredit’s long-running struggle to buy Germany’s Commerzbank CBKG.DE reinforces the point.
The second conclusion is that European regulators have mostly been bystanders. All of Italy’s major banks are under the direct supervision of the European Central Bank’s Frankfurt-based Single Supervisory Mechanism. Hostile bank takeovers are risky, while forcibly breaking up a financial institution poses even more of a threat to customers, shareholders and taxpayers. Yet concerns about financial stability appear to be largely absent from the latest Italian banking saga. As complex as this soap opera is already, it could get messier.
CHART OF THE WEEK
The world’s largest initial public offering comes with the most complex plan for letting insiders sell their shares. SpaceX has 16 different tiers of so-called “lockups” which determine when existing shareholders are allowed to sell out of Elon Musk’s rockets-to-chatbots company. Rob Cyran says this will turn what could have been a deluge of sudden selling into a long steady stream.
THE WEEK IN PODCASTS
Kevin Warsh is about to preside over his first monetary policy meeting as the Federal Reserve’s new chair. The once-vocal inflation hawk faces rising prices and President Trump’s demands for lower rates. Jon Sindreu and Gabriel Rubin joined Aimee Donnellan and Jonathan Guilford in the Viewsroom to debate whether Warsh can juggle the competing demands.
Diagnosing the malaise in economics is easy; coming up with solutions is harder. On The Big View this week I talked to the academic Mariana Mazzucato about her new book “The Common Good Economy” and her argument for taking a much broader approach to economic purpose.
PARTING SHOT
Every June the leading lights of the private equity and credit worlds descend on Berlin for SuperReturn, Europe’s premier annual summit for purveyors of what Jeffrey Goldfarb has labelled “captive capital”. This year the assembled buyout barons and debt dons had plenty of blame to pass around, from busted software loans, the Iran war, and higher interest rates. Liam Proud braved the coffee and German sausages to observe an industry playing defence.
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(Editing by Aimee Donnellan; Production by Oliver Taslic)
((For previous columns by the author, Reuters customers can click on LARSEN/peter.thal.larsen@thomsonreuters.com))