Italy's Empire-Builder Bazoli Bows Out at Intesa, Ending Eraby and
Former professor salvaged Banco Ambrosiano after Calvi death
New guard may seek growth through expansion in foreign markets
The shareholders of Intesa Sanpaolo SpA gathering in the bank’s glass tower in Turin are turning the page on an era in Italian finance, bidding farewell to one of the country’s most prominent bankers.
Giovanni Bazoli, 83, a law professor turned dealmaker who transformed an institution wracked by scandal into Italy’s most valuable lender through a series of acquisitions, is retiring Wednesday as chairman of Intesa’s supervisory board. After trading the halls of academia for the executive suite more than three decades ago, the devout Catholic became a behind-the-scenes financier known for discipline, not drama.
"Bazoli was a little-known professor in a provincial town and in a period of major consolidation in Italian banking he came out on top of the game," said Luigi Zingales, a finance professor at the University of Chicago Booth School of Business.
He also played a role in corporate transactions involving many of Italy’s household names, including Corriere della Sera, its No. 1 newspaper, and Alitalia SpA, the flagship airline. He’s departing at a moment when Italian authorities are struggling to shore up a financial system burdened with 360 billion euros ($407 billion) in soured loans -- the equivalent of almost a quarter of the nation’s economic output.
Intesa, the country’s best-capitalized large lender, joined a dozen other financial institutions this month to create a 4 billion-euro to 6 billion-euro fund called Atlante to bolster weak banks.
In tandem with Bazoli’s exit, Intesa will consolidate its supervisory and management boards into a single body and reduce the number of directors. Many of those seats have typically been filled by nominees of the non-profit foundations that have long been major stakeholders in Italian banks.
"Intesa wants to play the European game, and to do so it wants a governance model that institutional investors can better understand," says Marina Brogi, a professor of international banking and capital markets at Sapienza University in Rome.
Gian Maria Gros-Pietro, a 74-year-old economics and business professor who’s led the management board since 2013, will be Intesa’s chairman. Carlo Messina, 53, will remain chief executive officer. Bazoli will become chairman emeritus, responsible for cultural projects.
Bazoli, who championed client relationships as crucial to his business, leaves a legacy of competence. At 13.1 percent, Intesa’s common equity Tier 1 ratio -- a measure of financial strength -- is among the highest in the euro area. The bank’s expenses amount to 51.4 percent of revenue, below the 65 percent average for the 25 biggest banks in Europe, according to data compiled by Bloomberg Intelligence.
Intesa’s shares have returned an average of 7.6 percent annually over the past five years, compared with a 1.6 percent decline for the Bloomberg Europe Banks and Financial Services Index. Its market value of about 41 billion euros is almost double that of UniCredit SpA, even though its Milan-based rival is larger by assets.
“Bazoli provides a great example of a well-executed strategy progressively implemented by a major Italian banking group,” said Antonio Patuelli, the chairman of Italy’s Banking Association ABI.
Still, Gros-Pietro and Messina may have to deviate from their predecessor’s blueprint. With 4,100 branches stretching from the Alps to Sicily, Intesa relies almost entirely on Italy for revenue. While that stay-at-home approach has paid off in recent years, prospects for further growth are slim. Some analysts say it’s time to move outside Italy, a tack Bazoli endorsed in January.
“Intesa is the only Italian bank that’s in a position to expand abroad,” said Jacopo Ceccatelli, the CEO of Marzotto SIM SpA, a Milan-based broker-dealer. “It’s a riskier but more rewarding path and ambitious executives should take it to make Intesa an international bank.”
Some investors aren’t so sure. Alexander Pelteshki, a money manager at Kames Capital Plc in Edinburgh, said Intesa should keep cutting costs and working through its portfolio of non-performing debt, which amounts to 9.5 percent of its total outstanding loans on a net basis, data compiled by Bloomberg show.
“I would rather see Intesa refrain from growth ambitions at this stage and focus on immediate challenges,” said Pelteshki.
At the annual meeting today, Bazoli said Intesa is in no rush. "My hopes are for the future, a future in which the bank can strengthen its presence in Europe,” he said in a speech. “I don’t see transactions in the short term. There is no hurry and there are no risks on the horizon."
In any event, Bazoli’s departure will mark a new chapter for an institution that traces its origins to one of the most notorious episodes in modern Italian finance.
In 1982, the government asked Bazoli to help rescue Banco Ambrosiano a few months after its former chairman, Roberto Calvi, was found hanged under Blackfriars Bridge in London. Bazoli salvaged the lender, then used it as a springboard to acquire small and mid-sized banks up and down the boot of Italy.
By the time Intesa completed the acquisition of San Paolo IMI SpA in 2007 to create Italy’s largest bank by branches, Bazoli had taken his place alongside Mediobanca SpA’s Enrico Cuccia as one of the most influential bankers of his generation.
"One of the reasons I accepted this task was to demonstrate that you could act at a high level in finance, showing fairness, and contribute to the recovery of confidence in the country," Bazoli told investors at an Intesa shareholder meeting in February.
That confidence will be tested in the next month as two struggling lenders tap the Atlante fund to raise capital in public offerings and avert failure.