Monte dei Paschi drama has no heroes, only winners
Luigi Lovaglio’s survival at the world’s oldest bank is down to typical Italian wheeling and dealing
Italian capitalism has long been an opaque and convoluted affair: powerful insiders call the shots at listed companies, often to the detriment of ordinary shareholders. So the shock victory of a plucky underdog in a proxy fight might look like a sign that the bad old ways are finally being swept away by market forces. In truth, however, Italian wheeling and dealing is surprisingly hard to overcome.
The event itself is certainly noteworthy. Shareholders at Monte dei Paschi di Siena, the world’s oldest bank, voted to reinstate ousted chief executive Luigi Lovaglio, in a blow to the board of directors that had ejected him and large shareholder Francesco Gaetano Caltagirone, who wanted rid of him.
The candidature of Lovaglio, a competent banker and the architect of Monte dei Paschi’s turnaround and breathtaking takeover of rival Mediobanca, had none of the trappings of normalcy: he had been excluded from the list of directors proposed by the bank itself, and had failed to secure the support of proxy advisers. Despite that, he was backed by high-profile international institutions including BlackRock and Norway’s sovereign wealth fund.
So far, this sounds a lot like a win for the market. But a closer look at the voting register doesn’t quite bear this out. Despite the illustrious names in his corner, in the end Lovaglio only secured the votes of a minority of institutional investors at the AGM. The majority went with the board’s Caltagirone-backed list.
What swung it in his favour was the support of another powerful insider: Delfin, the Luxottica family holding company, which turned on erstwhile pal Caltagirone in rather spectacular fashion. Why, exactly, has yet to be revealed. It is of course possible that Delfin has voted with its wallet, for the candidate that it thinks will create the most value. But this still smacks of an internal Italian power struggle, with one kingmaker being replaced by the next.
Still, intentions and outcomes are not always correlated. And Lovaglio’s return will probably be good news for Monte dei Paschi. He has shown himself willing to make bold moves, even considering the sale of the bank’s €7.5bn stake in insurer Generali, which alone accounts for over a quarter of Monte dei Paschi’s market capitalisation. And the fact that his candidacy was supported by rival midsized lender Banco BPM may suggest that he is open to a tie-up which, given the overlaps between the two networks, would create huge amounts of value.
An all-share merger would also help loosen the grip of Monte dei Paschi’s large investors on the bank — something that Lovaglio, given his recent experience, may well be keen to see. While not exactly a victory for ordinary shareholders, the drama in Siena has inched the bank in the right direction.