Italian banking finds a new force

ITALY’S banks have been known for strange moves over the centuries, but sex changes have not been among them. Not, at least, until now.
That is what will happen to Banco di Roma, the big Rome- based bank until recently controlled by the IRI state holding company. It will become part of three-way banking merger under way with Cassa di Risparmic di Roma, the Rome savings bank, and Banco di Santo Spirito, another sizeable Roman bank, also formally owned by IRI.
The product, to be called Banca di Roma, will be Italy’s second biggest financial institution, with total assets over L130,000bn (S113.2bn) and some 1,100 branches by end-1992.
Although the difference in connotations between a Banco and a Banca may be lost on most Italians, let alone foreigners, the new name will be a small but significant sign of changes in the country’s creaking banking system
The three banks fit well together. The Rome Cassa is concentrated in Rome and Lazio; Banco di Santo Spirito is also strong locally, but has nationwide branches, too. And while Banco di Roma has no particular local roots, it offers a sizeable national and international network.
Their skills are also complementary. Banco di Roma’s dependence on relatively volatile interbank funds will be counter-balanced by the established local deposit base of its two partners. But Banco di Roma will also provide many of the international banking skills, particularly in capital markers, which the other two lack.
IRI’s willingness to sell stemmed partly from the fact that both Banco di Roma and Banco di Santo Spirito have reputations which are more illustrious than their earnings. In 1990, Banco di Santo Spirito’s net profits amounted to L92bn. Net profits at Banco di Roma were L159.2bn on total assets of L75,052bn.
By just changing one letter, the new Banca di Roma should capitalise on the strong national identity and international familiarity of its almost eponymous predecessor. Yet the switch from masculine (banco) to feminine (banca) will also provide a newer and more modern gloss, according to Mr Cesare Geronzi, director general of the Rome Cassa.
Whatever the semantics, investors may be well-advised to remember the name. Under the complex merger, IRI now has 35 per cent of holding company controlling the three banks.
However, IRI’s current financial problems mean it may end up with much less before the new bank takes shape.
Mr Geronzi will not say whether or when IRI might float its shares. But many analysts believe that private investors, rather than IRI, will eventually form the second biggest shareholding group in the new bank after the foundation which controls the Rome Cassa itself. The investment could be appealing. Banco dl Roma, which until last year was the only member of the trio to be quoted, has hardly been a star; only in 1991 year did it resume dividend payments after a five. year gap.
By contrast, Mr Geronzi forecasts the new Banca di Roma will have operating profits of L1,800bn in 1992. That will rep. resent a full year’s contribution from the Rome Cassa and Banco di Santo Spirito, and six months’ earnings from Banco di Roma, which will be integrated by next April.
His optimism is indirectly confirmed by some bankers’ astonishment that the deal has been allowed to go through without running into anti-cartel barriers.
Although the new bank will have a virtually uncontested position in central Italy, Mr Geronzi denies that a monopoly will be the primary motor for its profits. “When we thought this up it wasn’t to create the biggest bank in Italy but to create a unit able to fight growing competition and retain Its market share, and then go on to win more,” he says.
Earnings may also be limited by Italy’s powerful bank unions and strict job protection laws, which will hamper large-scale rationalisation. Even Mr Geronzi talks of staff transfers rather than cuts.
That may be partly explained by the fact that the new bank still has room for organic growth. In the 20 towns where the Rome Cassa and Banco di Santo Spirito have overlapping branches, closures have been avoided by moving one branch to another part of town. The market could sustain both branches, and closing one would only have opened the door to a competitor, he explains.
The Rome Cassa will also continue its strategy of taking minority stakes in neighbouring savings banks. So far, It has struck deals with two banks, with a third due by the yearend.
Eventually, Mr Geronzi would like to extend such deals as far north as the rich region of Emilia Romagna. “Obviously it’s a slow process, but we have a lot of talks with other local savings banks under way,” he says.