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November 16, 2011 8:11 pm
Mario Monti obviously knows a technocrat when he sees one. Italy’s new prime minister has chosen Corrado Passera, chief executive of Intesa Sanpaolo, to be economic development minister in his interim government. The remit, in effect, is to be Mr Structural Reform.
Mr Passera has been sounding like a minister-in-waiting for a while, with his acute diagnoses of Italy’s problems. He will bring energy and talent to a tough and, perhaps, thankless task. But Italy’s gain could be Intesa shareholders’ loss.
The appointment of Mr Passera’s deputy, Marco Morelli, to replace him at Italy’s biggest bank by market value looks temporary; filling such a big post invariably involves regional sensitivities in Italy. Mr Passera himself never quite resolved the tensions inherent in the merger of Milan’s Banca Intesa and Turin’s Sanpaolo IMI that created Intesa Sanpaolo in 2006 (even though the two cities are only an hour’s drive apart). Shareholders may endorse Mr Morelli, who runs the retail banking network. But with Italy’s banking sector both inherently weak and exposed to increased sovereign risk, the bank should not delay in naming a permanent successor.
Mr Passera leaves Intesa in better shape – marginally – than its arch rival UniCredit. It is a bit less extended geographically, arguably has a stronger domestic franchise, and is better capitalised: a core tier one ratio of 10.2 per cent, compared with under 9 per cent at UniCredit. But everything is relative. Intesa’s shares are trading at just a third of book value, only slightly better than UniCredit’s. With so much riding on the success of Mr Monti’s technocratic administration in restoring Italy’s credibility with investors, the risk to Italian banks is still to the downside. Mr Passera’s successor will have a colossal job ahead to restore Intesa Sanpaolo’s lost shareholder value.
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