The latest outpost of Matteo Renzi’s revolution is a smart conference room in Milan where two of Italy’s best-known bankers sit shoulder to shoulder.
These are the new headquarters of the Cassa Depositi e Prestiti, the country’s €410bn sovereign wealth fund. The 40-year-old Italian prime minister is hoping to blow the dust off the 165-year-old CDP by bringing in Claudio Costamagna, former chairman of Goldman Sachs in Europe, and Fabio Gallia, who was chief executive of BNP Paribas in Italy, and giving them a free hand to spur investment.
“The mandate we’ve got is to do things that are in the context of creating and sustaining the growth of the economy,” says Mr Costamagna, 59, describing his arrival in August — and that of 52-year old Mr Gallia — as “an accelerator”.
The CDP’s new bosses are hoping they can capitalise on a recent surge in foreigners buying Italian companies. Yet for all the sizzle, their success still remains to be seen.
On paper, at least, the CDP, which dates from 1850 and shares a purpose with France’s Caisse des Dépôts and Germany’s KfW, has the firepower to make an impact. It taps the €250bn Italians have deposited in savings accounts at the post office and also raises its own funds through credit lines and bond issues guaranteed by the state.
Owner of a quarter of oil group Eni, a third of energy companies Terna and Snam and two-thirds of shipbuilder Fincantieri, and venture capital, private equity and real estate businesses it has influence in Italian boardrooms.
Silvio Berlusconi’s government in 2003 began to see the CDP as a vehicle for taking assets off the state’s balance sheet while, in effect, keeping them under state control. Mario Monti’s technocrat government tapped the CDP to take over three government agencies — including export credit company Sace — for €10bn, a small step in Rome’s efforts to reduce its $2.2tn public debt.
Mr Renzi ejected the previous managers of CDP, who had been appointed by his predecessors, with a ruthless pragmatism reminiscent of his ouster of Enrico Letta, the former prime minister, in a party vote. He has made clear he wants the fund to assume a more muscular role.
The aim is “to exploit its full potential to have a stronger impact”, says Mr Gallia, who will present a new business plan in December.
The crux of the change they intend centres on a view Mr Costamagna shares with Mr Renzi that the state should step into the areas where the market has failed to breathe life. It is a crucial issue in Italy, where family-owned, small firm culture is blamed for low productivity and investment.
Net income at CDP
“The concept of market failure is one of the principles that allows us to invest, and we can do that alone or with other co-investors,” says Mr Costamagna, who was last week courting Asia and Middle East sovereign funds in Milan.
While Mr Costamagna and Mr Gallia decline to provide details of specific projects, bankers say dossiers under consideration include a restructuring of €6bn of debt weighing on state-owned oil group Saipem as well as investments in ultra-fast broadband and a bad bank to clean up a portion of Italy’s €330bn in non-performing loans.
More broadly, they intend to move companies in which CDP has already invested — including an investment made by previous management in UK-based hotel group Rocco Forte — swiftly towards IPO. They will lobby Brussels for more EU funds, they say.
Italy’s public debt
“We need to create more supply of paper: equity, debt, corporate bonds, capital, because more supply creates opportunities. It creates liquidity for large international investors,” says Mr Costamagna. A study from Milan’s Bocconi University suggests Italy could increase GDP by 1 per cent if it doubled the number of companies listed on the stock exchange.
But they admit constraints. Not least there is the risk of infringing the EU’s state aid rules and the need to remunerate the Treasury, which owns 80 per cent of CDP, and banking foundations, which owns 20 per cent. Net income at CDP fell to €1.16bn in 2014 from €2.5bn in 2013 as low interest rates hit interest margins.
As for Mr Renzi’s reform programme, both men concede more is to be done. “But let’s not forget where we are coming from,” Mr Gallia says. “Before we were stuck in the parking lot, now we are on the highway.”