Mediobanca Seeks Wealth Deals as Italian Consolidation Gains

Mediobanca SpA Chief Executive Officer Alberto Nagel is weighing acquisitions in wealth and alternative asset management as he seeks to retain the lender’s independence amid a quickening wave of consolidation in Italy.

The CEO, who has run Mediobanca since 2008, plans to grow in private banking, while shying away from some of the larger deals starting to take place in Italy.

“We are an exclusive members-only club and we’d like to keep it like that,” Nagel, 55, said in an interview.

Mediobanca Seeks Wealth Deals as Italian Consolidation Gains

Intesa Sanpaolo SpA kicked off the most recent round of Italian banking consolidation when it bought smaller rival UBI Banca SpA. UniCredit SpA is being pushed by the Italian government to take over of Banca Monte dei Paschi di Siena SpA. Mediobanca wants to gain more wealthy clients instead of growing in retail banking.

The lender, set up after the Second World War to fund Italy’s reconstruction, sees wealth and alternative asset management as niches which could thrive even amid record-low interest rates and a sluggish domestic economy, Nagel said.

Mediobanca is also known for its advisory role on large M&A transactions in the country, including the Intesa deal. The bank, which has a return-on-tangible equity of about 9%, reported a quarterly profit for the three months through September that beat estimates on higher income from investment banking and wealth management.

Scouting for Deals

“We can do large M&A in Italy’s wealth management distribution to speed up growth, the main issue is the availability of assets,” said Nagel at a virtual round-table forum with Bloomberg News.

Italian players such as Banca Mediolanum SpA, Banca Generali SpA and Fineco Bank SpA could be good fits for Mediobanca’s strategy, but they are not up for sale. “We are monitoring each of them, but there are no live talks,” Nagel said, adding that the lender wouldn’t want to go hostile on a transaction.

Mediobanca, which has said it is ready to sell part of its 13% stake in Assicurazioni Generali SpA to fund bigger deals, abandoned plans to buy Banca Generali earlier this year after the insurer decided not to sell its banking and wealth management unit, people familiar with the matter said at the time.

“We have very good relations with Generali, but the timing didn’t work,” Nagel said. “We realized it was an industrially strong combination but it lacked compelling financial terms for both” Mediobanca and the insurer.

Mediolanum climbed as much as 2.3% in Milan trading, Banca Generali gained up to 2.1% and Fineco 1.2%. Mediobanca rose 0.8%, giving the firm a market value of 6.6 billion euros.

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By focusing on smaller deals, Mediobanca is seeking to bulk up before potentially executing a larger transaction. Given the lack of assets for sale, one option in Italy could be to buy consumer or wealth businesses of foreign banks that plan to leave the country, as it did in 2015 when the bank absorbed Barclays Plc’s consumer-banking operations in Italy.

“Mediobanca will have a solid growth trajectory and profitability notwithstanding the Covid impact also in 2021,” he said. The bank, he said, is seeking to take advantage of “structural trends like the increase in wealth management, higher penetration in consumer finance and corporate activity linked to reshaping sectors.”

Mediobanca, founded in 1946, sat at the center of Italian capitalism for decades through a web of holdings in its biggest companies. Nagel, who joined in 1991, refocused it on banking, developing the consumer business and also sought gains in asset management.

Mediobanca trades slightly higher than some rivals -- at about 0.75 times tangible book value compared with 0.71 times for Intesa Sanpaolo SpA. Still, it’s not escaped the decline in banking stocks this year, dropping 24%, in line with a decline of the STOXX Europe 600 Banks Index.

New Investors

Nagel’s challenge for the next three years is to convince investors that his expansion plan will be successful and keeping large investors onside.

Luxottica founder Leonardo Del Vecchio has been the bank‘s biggest single investor since last year. The billionaire, who now owns an 11% stake, has criticized the bank’s management for being too passive in seeking growth opportunities and for being overly dependent on returns from the Generali stake. Nagel reiterated in the interview he has regular conversations with Del Vecchio, without commenting further.

Even in the absence of external growth, Mediobanca plans to increase its distribution capacity in wealth management by 50% through 2023, by hiring financial advisers, private and investment bankers, Nagel said. “This will lead to high single-digit or double-digit growth in revenue in wealth management.”

©2020 Bloomberg L.P.

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