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AgendaSeptember 1 2014

Intesa Sanpaolo head of CIB takes a more global view

Intesa Sanpaolo's head of corporate and investment banking, Gaetano Miccichè, discusses the bank's international expansion plans and the challenges it is facing in its home Italian market thanks to a slow and underdeveloped domestic economy.
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Intesa Sanpaolo head of CIB takes a more global view

When The Banker interviewed Intesa Sanpaolo’s head of corporate and investment banking, Gaetano Miccichè, in Milan this July, he had just left a meeting in which his team had discussed the financing for a gas liquifier in the US. Intesa had agreed to finance and guarantee interest risk to the value of $800m in a deal involving a number of banks. Being able to provide this product to Intesa’s corporate clients is crucial, says Mr Miccichè.

Project and infrastructure finance has experienced peaks and troughs over the past few decades, thanks to floods and droughts of liquidity. The financial crisis mopped up liquidity and raised costs of intra-bank financing, keeping lenders away from large, long-term projects where returns do not materialise for several years.

“In 2009, no [bank] would have invested its own liquidity in a project where returns are gained after seven years; money was so expensive that these projects were interrupted because they were not economically viable. Now, the project finance market has reopened,” says Mr Miccichè.

New geographies

Mr Miccichè is dedicated to following corporate clients where they most need the bank’s support and where large infrastructure projects are needed. He is focused on ensuring that the bank's international network is nimble enough to adapt to changing requirements.

“There will always be a need for infrastructure. First it was in the BRICs [Brazil, Russia, India and China], then it was the turn of south-east China; then there will be Africa and the return of northern Europe,” he says. “Different countries grow at different speeds. Just think of China – by 2050 there will be more than 25 cities in China with in excess of 30 million people in each.”

Mr Miccichè is naturally prone to emphasising the potential of his corporate division; with a wealth of corporate experience and contacts, the Sicily-born banker is particularly tuned into the needs and challenges experienced by the lender’s corporate clients. Mr Miccichè started his career in banking more than 40 years ago, before moving into yachting, the industrial and chemical sectors and manufacturing. He returned to banking in 2002, as head of Banca Intesa’s merchant banking division (prior to its merger with Sanpaolo IMI), but still holds board director roles with fashion company Prada and tyre maker Pirelli.

Until recently, Intesa had just four key hubs outside of Italy – London, Hong Kong, New York and Dubai – which provided a mix of both corporate and investment banking services. From these, the Italian bank manages other offices across the world, from Frankfurt to Beijing. Mr Miccichè is keen to expand to other countries. This new impetus to follow clients to key geographies has already led to the creation of a new subsidiary in São Paulo, Brazil, which was opened in July and dedicated to serving large businesses.

A crucial element of the expansion strategy is that new operations will be small in size and will not absorb much capital from the group. “We want to have local headquarters that are light [in staff] but with highly qualified people – 30 to 40 people, as we’ll have in São Paulo – that will serve as a knowledge centre on what goes on in that country, and as a relationship centre for local large corporates and banks,” says Mr Miccichè. “Macroeconomic growth is not constant so I don’t want to mobilise large amounts of capital. We don’t need to buy a large [local] bank, we want to set up terminals in the most interesting areas right now.”

Innovative thinking

Such prudence is wise given both the state of the Italian banking sector generally and Intesa’s latest yearly results, in particular. Italy’s second largest lender by assets closed 2013 with a loss of $6.63bn. Moreover, the group's non-performing loans represented 9.2% of total loans in the year. 

Substantial provisions were set aside in 2013 to cover these losses, largely in anticipation of the results and subsequent conditions set by the asset quality review that will be carried out by the European Central Bank later this year. This largely explain the losses, says Mr Miccichè. He remains optimistic, however, about the bank’s health, pointing towards the encouraging results from the first half of 2014. The group’s net profit for the first half of this year was €720m ($961.7m), a 70% jump from the same period in 2013. If the costs of the retroactive taxation of shares in the Bank of Italy is excluded from the results, the net profit goes up to about €1.2bn.

Banca IMI, Intesa’s investment arm, of which Mr Miccichè is chief executive, recorded net profits of €353m for the six months to the end of June 2014, 30% higher than the first semester of 2013. Its capital markets divisions were responsible for three-quarters of this, thanks to deals such as the initial public offerings (IPOs) of asset manager Anima, ship builder Fincantieri and credit data provider Cerved, as well as the US dollar-denominated notes issued by telecom operator Wind for a total of $5.75bn.

The Italian equity market, in particular, has generated a lot of activity so far this year, thanks to increased liquidity and investor interest in southern European issuances. IPOs on Milan’s stock exchange, including the smaller companies segment, totalled €3.2bn in the first six months of the year; Intesa acted as bookrunner on €2.1bn-worth of these.

Although not an investment banker by training, Mr Miccichè recognises the importance of investment banking within commercial lenders, not just from a revenue point of view but also for the tendency of these activities to generate innovation.

“If, every day, you played football next to Lionel Messi, Cristiano Ronaldo and other great players, after a while, you would improve your moves. Investment banks, more than commercial banks, have an ability to innovate. It is also important to the group’s profitability,” says Mr Miccichè. He believes that the benefits of this outweigh the added risks that investment banking injects into lenders, especially in a market such as Italy, which has traditionally been very conservative.

Italy lags behind

Intesa's growth is still very much linked to the economic climate in Italy, and Mr Miccichè believes that it will take more than labour and judiciary system reforms to help local businesses grow and to attract international companies to the country. The modernisation of transport and other types of infrastructure are also essential, he says.

Delays and inefficiencies have traditionally dented the momentum for new public works in Italy and Mr Miccichè has strong views on this. He points to the long-standing Mose project, which is intended to protect the city of Venice and the Venetian lagoon from flooding, as an example. The project has been outstanding for more than a decade, held up by, among other things, an investigation into corrupt practices. 

“What disappoints me more is that some of these works have been in the making for more than 30 years. In the world’s large cities, every six months things change; there’s a sense of effervescence. [In Italy] you start a project and then, soon after, you have to deal with judiciary appeals [caused by] bureaucratic hurdles or public protests that stop it. The timing to get these big works done is indicative of the success of a country.”

Within the corporate world, there are other concerns that threaten Intesa’s growth agenda, says Mr Miccichè, particularly when wearing the group’s general manager hat. The vast majority of Italian businesses are small, inward looking, often lacking in corporate governance practices, and generally of poor credit quality, he says. Furthermore, while some corporates in the country are doing well, others continue to lag behind. The divide between north and south of the country is still very much felt, he says.

“Since I’ve been with the bank, I have never presented our corporate [products and services] in Sicily, a region dear to me, because of lack of suitable corporate partners: a population of 6 million but no enterprises with a turnover of more than €30m to €40m – aside from divisions of international companies present there,” says Mr Miccichè.

Catering for the expansion needs of existing clients is, indeed, crucial for a bank such as Intesa. But equally important is that more Italian companies graduate from small family-run operations to solid firms that expand abroad and may consider capital markets, as well as bank finance, as funding tools – in both the north and south of the country.

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Silvia Pavoni is editor in chief of The Banker. Silvia also serves as an advisory board member for the Women of the Future Programme and for the European Risk Management Council, and is part of the London council of non-profit WILL, Women in Leadership in Latin America. In 2019, she was awarded an honorary fellowship by City University of London.
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