Handelsblatt Exclusive

The Optimist from Rome

Carlo Messina Reuters (2)
Mr. Messina moved up the ranks at Intesa Sanpaolo to become chief executive in 2013.
  • Why it matters

    Why it matters

    The European Central Bank is taking a close look at the liquidity of some Italian banks, leading many to fear the country’s finances are in a poor shape.

  • Facts

    Facts

    • Carlo Messina has led Italian bank Intesa Sanpaolo since 2013.
    • The bank, headquartered in a modern building in Turin, was created in 2006 from the merger of Sanpaolo IMI and Banca Intesa.
    • Italy recently set up a much praised ‘bad bank’ system designed to bailout financial institutions without taxpayer support.
  • Audio

    Audio

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Carlo Messina, born and raised in Rome, had been at the helm of Italian bank Intesa Sanpaolo since 2013. Headquartered in Turin, the bank was created in 2006 after the merger of Sanpaolo IMI and Banca Intesa. It has more than 11 million customers, most in Italy, but most of its shareholders are in the United States.

Last year, Mr. Messina raised earnings and dividends at Intesa Sanpaolo. The bank posted net profit of €2.7 billion, or $3.0 billion, the most for a single year since 2007.

 

Handelsblatt: Italy’s banks are kicking a mountain of €200 billion in bad debt down the road, and the European Central Bank is now taking a careful look at some lenders. Should we be concerned?

Carlo Messina: There are two problems that have hurt the value of Italian banks: the future of Monte dei Paschi di Siena and troubled loans. I believe that portrayals of the Tuscan bank’s difficulties were exaggerated. And the market also views the problem with bad loans incorrectly. It pays too much attention to the gross value instead of the net value, and it doesn’t make allowances for the strong collateral with which these loans are guaranteed.

Italy has just decided to create a ‘bad bank’ to get the situation with nonperforming loans under control. Is this an adequate solution?

Personally, I don’t think a bad bank is all that important. I believe it would be more important to enable banks to gain faster access to collateral. The government should work on that. If we could reduce this period of seven to eight years to two to three years, we would have a functioning market for non-performing loans, with realistic prices, and we would have no need for a bad bank.

Are you worried about a new bank crisis in Italy or Europe?

Not at all. The only possible cause of a new crisis would be a liquidity bottleneck. But in times like these, when there is sufficient liquidity, I see no real threat of a crisis. When you look at the capital ratios and total debt of Italian banks, we are in better shape than banks in other European countries. Our bank, for example, does very well, with a core capital ratio of 13 percent a debt ratio of 6.8 percent

Don’t you find the news disconcerting that the European Central Bank is now analyzing the current liquidity situation of some Italian banks?

I think the ECB does an outstanding job, including in its supervision of the banking system. And there is nothing wrong with assessing liquidity. On the other hand, Italian banks, compared to banks in other countries, tend to hold higher deposits, thanks to the high savings rate among Italians.

The ECB will probably lower its interest rates even further into negative territory on Thursday. Doesn’t this create new risks and new turmoil for banks?

In my opinion, the ECB will decide on even more negative interest rates. The main objective here is the exchange rate. A weaker euro against the yen and the dollar would stimulate growth through cheaper exports. There is probably a limit for negative interest rates. Still, I believe that the ECB could go even lower.

 

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