Mediobanca SpA, Italy’s biggest listed investment bank, will sell stakes in companies including Assicurazioni Generali SpA and Telecom Italia SpA, as it seeks to become profitable again.
Mediobanca plans to raise 1.5 billion euros ($2 billion) by selling shares in Telecom Italia and RCS MediaGroup SpA, and reducing by about 3 percent its 13.2 percent interest in Generali over three years, the Milan-based company said in a statement today.
“We would have preferred a more aggressive approach to reducing the equity portfolio, especially a larger stake in Generali,” Christian Carrese, a Milan based analyst at Intermonte SIM, wrote in a note today. Mediobanca fell as much as 7 percent, the biggest decline since April 19, and was the worst performer on Milan’s benchmark FTSE MIB index.
Mediobanca has used holdings in Italy’s biggest companies to dominate the nation’s deal-making, a grip it’s losing after some of the investments soured. Chief Executive Officer Alberto Nagel is selling stakes in businesses as Italy’s longest economic slump in 20 years hurts its corporate business and increases losses from soured loans.
“The strategy is aimed at achieving, over the medium term, a business model which is simpler, more value-creating, focused on specialized banking activities,” Nagel said at a presentation in Milan. The timing of the disposals depends on market conditions, he said.
The sale is part of a three-year plan targeting revenue from banking activities of 2.1 billion euros by 2016. The bank said all publicly-traded securities will be marked to market, writing down their value by 400 million euros in the fiscal year ending June 30.
Mediobanca, which posted a fiscal third-quarter loss after booking losses from equity stakes, expects a 200 million-euro loss in the year to June, after writing down some of its holdings.
“After writing down holdings this year we see no further need of impairments over the plan period,” Nagel said. Mediobanca will exit investor partnerships, such as Telco SpA, the main shareholder in Telecom Italia. “This will allow Telecom to participate in the consolidation under way with more options.” The bank will leave the Telco investor group in September and intends to sell its 2.6 percent stake in Telecom Italia within three years.
The lender said it will boost its international corporate and investment banking business by hiring bankers at its offices abroad, as it seeks to expand in growth markets such as Latin America, China and Turkey. The share of revenue from abroad will increase to 45 percent in three years from 30 percent, the bank forecast in the plan.
Mediobanca’s core Tier 1 ratio, a measure of financial strength, will stabilize at about 11 percent to 12 percent over the three-year period from 12 percent at the end of the first quarter, it said. The bank, which hasn’t commented on whether it will pay a dividend this year, plans a 40 percent payout ratio in 2016 and return on equity of 10 percent to 11 percent.
The company will develop its wealth management business by setting up Mediobanca Alternative Asset Management, which will focus on private equity and debt.
Executives may consider small acquisitions in private banking and asset management, Nagel and General Manager Saverio Vinci told analysts.