Ray Dalio's Biggest Italian Short Target Intesa Up for Fight

Updated on
Messina says Dalio will lose money on shorting Intesa Sanpaolo.

The more billionaire hedge-fund manager Ray Dalio’s Bridgewater Associates bets against Intesa Sanpaolo SpA’s stock, the more the investor is set to lose, according to the Italian bank’s chief executive officer.

Intesa became Bridgewater’s biggest short bet in Italy as the company tripled its negative wagers against companies in the country over the last three months. The lender, one of the few banking stocks to rise amid global turmoil this week, will win the battle, CEO Carlo Messina said in an Bloomberg Television interview on Thursday.

“When we had a conversation in October, he was short on Intesa Sanpaolo and Italy,” Messina, who leads Italy’s biggest bank by market value, said in the interview. “I told him he could lose money on our position and in the end I think he lost money. Again, increasing the position, I think he’s losing money again.”

Shorts by the world’s largest hedge-fund in Italy rose to $3 billion and 18 firms, up from $1.1 billion in October, according to data compiled by Bloomberg. Most targeted financial industry companies.

“In the end, we are so strong in fundamentals that it is difficult to have an impact in the short term,” Messina said. “And delivering on the business plan, we are in a position that during this period we can probably win this competition with him.”

Intesa on Tuesday announced a business plan that focuses on more lucrative products such as wealth management, private banking and insurance while cutting its stock of non-performing loans by half by 2021. It also announced a dividend equal to 85 percent of 2017 profit and said it had met an earlier goal of returning 10 billion euros ($12.2 billion) to shareholders over four years.

However, Intesa’s 30 percent rise in the four years since Messina announced his last business plan makes the stock expensive compared with some of its peers at about 1.12 times tangible book value. Rival UniCredit SpA, with a book value of 0.7 times, has more potential for growth, according to Jefferies, which has a hold rating on Intesa.

Some fund managers are betting on stock declines in Italy, where elections scheduled for March 4 are widely expected to produce no clear winner. That would create difficulties in forming a government and make it hard for the country to produce the wide-ranging economic reforms that investors and the European Union are looking for.

“In Italy, there could be some volatility so its understandable you can take some position,” Messina said.

— With assistance by Nishant Kumar

(Updates with details of Intesa’s business plan in sixth paragraph.)
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