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Financial Times 14/04/2011
Capital message hits home for chief.
Interview with Corrado Passera, Intesa Sanpaolo chief
executive
A demand for higher ratios has caused a change in
approach,writes Patrick Jenkins
Four of Italy's six big banks - including Intesa, the country's
largest high-street lender -
have now announced a combined 10.5bn of capital raisings since
the start of the year.
Corrado Passera, Intesa's chief executive, refuses to be drawn
on the motivations of
regulators, but it is clear that it was their decision rather
than his to raise capital now.
"We changed our view on what regulators will consider the new
normal [capital level],"Mr Passera said in an interview last week
as he began a two-week roadshow of
investors in the US and Europe. "The idea that this normal was
around the corner was
already in our minds. But the time framework to reach that new
normal level, I think,
changed." He is loath to specify when the pressure was applied
by the likes of Mario
Draghi, Bank of Italy governor, Giulio Tremonti, finance
minister, and Andrea Enria, the
Italian chairman of the European Banking Authority. But he
admits it was only "in the
last few weeks". "It was quite rapid. A couple of days after
meetings I had with
European and Italian regulators, I called the chairman and said
I've changed my
mind." He can scarcely explain it any other way. Look back at
any reference to Mr
Passera's stance on capital raising in the last three, six or 12
months and his position
has been consistent - saying as recently as November that he
would not have "any
recourse to other capital measures". The 5bn cash call Intesa
announced last week
should raise the bank's ratio of core tier one capital to
risk-weighted assets from 7.1 to
8.7 per cent and to about 10 per cent by the end of the year, as
defined by the new
Basel III international rule book on capital. Mr Passera says it
had become "a message
from a good part of the market" that they wanted higher capital
ratios. Italian banks
have seen their share prices stagnate, partly, say analysts,
because of capital ratios
that were out of kilter with European rivals, and partly because
of sluggish Italian
growth prospects. Mr Passera believes his three-year strategic
plan addresses that
concern, too. "Italy does not exist," says the 56-year-old chief
executive. "The national
statistical averages represent a country that does not exist.
The nine regions that are
the top regions, where we have more than 60 per cent of our
business, if they were a
country, then it would be at the very top of the European
rankings." He highlights
Italian infrastructure - in which "at least 100bn will have to
be invested over the next
five years" - as a big financing opportunity. In all, Intesa's
plan comprises 150 different
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projects, focused on a mix of growth plans and cost cuts. Chief
among the cuts will be
a net reduction of 3,000 staff - out of a total of 100,000 - and
the closure or
restructuring of 1,000 branches out of 6,000. Between growth and
efficiency drives,
even after the equity raising, Mr Passera is convinced Intesa
can generate a return on
tangible equity of about 15 per cent by 2015. "We believe the
execution risk of this
plan is relatively low," he said. "Now shareholders must
decide."
Italian solution
Corrado Passera admits his views are "maybe not politically
correct. But I will tell you
anyhow". He says: "Attracting, having, developing companies in
your country has avalue for the country." That is why he is trying
to devise an "Italian solution" for a
rescue of troubled dairy group Parmalat. With the proviso that
any rescue must be
"entrepreneurially and industrially sound", he says it makes
patriotic sense to help
save it. "It is [important] when a company is at the end of a
long chain of companies
that are relevant in terms of employment. Every country in
Europe is doing the same,
explicitly or implicitly. Saying we don't care is not the right
thing."
