Italy risks failing in its ambition to become a more “business friendly” economy unless it presses ahead with major structural reforms, one of the country’s top bankers has warned.
Alberto Nagel, the chief executive of investment bank Mediobanca, said it was imperative that competition, civil justice and public administration reforms were completed.
The 56-year old, who is credited with modernising a bank that for decades has been a powerbroker for Italy’s financial and business elites, also urged the government not to squander the €200bn EU-backed fund designed to help the eurozone’s third-largest economy recover from the pandemic.
“A key priority for Italy is to spend the funds well, avoiding risks of increasing statism and favouring, on the contrary, an ecosystem that should become truly business friendly,” Nagel told the Financial Times.
“[The recovery fund] can be a game changer in terms of additional expected [economic] growth, which is particularly significant for a highly indebted country,” he added.
The warning comes as Italian lawmakers prepare to vote in a presidential election this week, with divisions threatening prime minister Mario Draghi’s chances of succeeding outgoing president Sergio Mattarella.
Nagel says that Draghi, who has been prime minister since early last year, is the best hope of achieving reforms.
“Clearly, the best assurance for this to occur is for Mario Draghi to remain in a top institutional role for some years,” he said of the former European Central Bank chief who, if elected president, would have a seven-year mandate.
Nagel’s prescription for Italy’s economy comes as Mediobanca is locked in a power struggle with billionaire entrepreneur Leonardo Del Vecchio, a large investor in both the bank and Generali, Italy’s largest insurer.
Del Vecchio believes the Milan-based bank relies for too much of its profits on a 13 per cent stake it holds in Generali. It is a claim that Nagel, who has led Mediobanca since 2013, is quick to push back on.
“As far as Mediobanca is concerned the Generali investment makes an appreciable contribution to our financial targets and has a return that is distinctly higher than our cost of equity,” he said.
Del Vecchio and construction tycoon Francesco Gaetano Caltagirone, another Generali investor who recently quit its board, are pushing for a shake-up in strategy at the insurer and the departure of chief executive Philippe Donnet.
Governance at Generali is also a point of contention between Mediobanca and Del Vecchio and Caltagirone. The pair claim the insurer’s outgoing board should not be allowed to recommend their successors to shareholders before the group’s annual meeting in April — a plan that Italy’s financial regulator, Consob, gave the greenlight to last week.
The dispute is one of several to have flared up in recent months that have tested how Italian corporate governance handles the demands of both minority shareholders as well as those of the state.
“Right now there are a number of important [decisions looming] that will be a test for the maturity of Italian capitalism” said Nagel. “Italy must catch up with governance practices favoured by international [markets] in order to make the country more attractive for investments,” he added.
Until just three years ago, a formal agreement existed among some of Mediobanca’s influential minority investors that effectively gave them control of the lender.
Despite the ructions over Generali, Nagel says he is focused on the future of Mediobanca, which for much of its 76-year history sourced business from an array of family-owned Italian companies that held stakes in the bank, including tyre manufacturer Pirelli and construction group Italcementi.
Over the past 10 years, Mediobanca has cut back its cross-shareholdings, generating roughly €5bn in proceeds. Institutional investors now make up more than 45 per cent of its shareholder base, with much of the remainder held by individuals. Del Vecchio recently became the bank’s single largest shareholder with a 19.4 per cent stake.
Nagel has sought to diversify bank’s businesses by developing a wealth management division, which he says played an important role in driving revenues to a record high of €2.6bn last year and increasing fee income.
Amid the change at Mediobanca over the past decade, Nagel shares a keenness for keeping the bank out of the spotlight long associated with its co-founder and driving force Enrico Cuccia.
“We are confident that our sober approach is still the best choice in today’s world,” said Nagel.