Intesa has the money! Or at least a lot of it.
An hour long presentation on the banking sector of Italy is not how most people want to spend their Thursday afternoon. But then again, I am not most people. “Number cruncher”, “"Dweeb”, and “Geek” are just a few things I would call myself. HA! But the truth behind it is that the financial markets are the life blood of the world economy. As the money goes so do the investments. If you can understand the various market positions and opportunities, you can exploit them for personal as well as commercial gain.
Intesa SanPaolo is a conservative Italian depository institute with a global presence, including branches in New York and D.C. With over €13B in reserves (56% of exposure), they maintain a well-balanced P&L showing over €4B in operating income. With a broad mix of assets and income streams, they consistently provide their shareholders with quality dividends. They are no different than any other institution in regard to their margin compression and focus on cost control. Intesa has sought to consolidate their branches and push more young depositors to their mobile banking platform to drive down the labor costs and overhead. As we have come to be aware, the older Italian generation wants to be able to walk into a branch and get service from a real person. They want to know a qualified individual is on their side. It was interesting to hear his interpretation of the Italian aversion to risk. For centuries is was considered a sin to borrower money from anyone including the bank. His own parents built their house with their own money and paid the works directly every two weeks, something not too uncommon for that and previous generations.
Banking isn’t a topic that everyone finds riveting. Seemingly the few that stayed awake, asked some pointed questions and found Angelo Gersandi’s answers verbose and thoughtful. Perhaps there was also a lost in translation moment, when the distinguished gentleman attempted to contrast the socio-economic problems with the political environment and mass immigration that Italy seems to be bearing the brunt of versus the EU as a whole. His point was correct in that it is easier to deal with the influx of people when they are all concentrated to one port of entry. It becomes easier to document them, feed them, provide shelter and other various services as well as disperse them more evenly around the country and continent. It was clear from his discussion that the political winds directly impact their bottom line and that Brexit will no doubt continue to shape the landscape as well.
But the real beauty is the work that Intesa is doing to bolster and solidify the innovative talent set that has always prevailed within Italy. Venture Capitalism doesn’t really exist inside Italy. As was mentioned, Italians are naturally risk adverse. They work hard for their money and they are not quick to invest in pet projects by those without a proven track record. Yet, Neva Finventura, a side project of Intesa that invests in start-ups, has stepped into that space to fill the gaps. The Italian Small to Medium sized Enterprises (SME’s) have proven to be incredibly nimble over the years including through the double dip recessions of 2008 & 2013. Helping to incubate advancements through educational partnerships with the major universities and loans directly to the innovative start-up, Intesa is leading the market where no other Italian institution is willing to go. That is not to say that there are no other opportunities for start-ups to find the resources they need within Italy. But Intesa’s position, and their success, will help to change the mindset that prevents so many from getting the financial back they need. Oh, what the future holds for Italia!