October 24, 2019 / 12:44 PM / 2 months ago

UPDATE 1-Mediobanca CEO defends strategy under fire from Italian billionaire

(Adds comments from CEO)

By Gianluca Semeraro

MILAN, Oct 24 (Reuters) - Mediobanca’s chief executive defended its expansion into consumer credit and wealth management on Thursday after billionaire Leonardo del Vecchio, who has bought 7% of the Italian investment bank, questioned the strategy.

Del Vecchio, the 84-year-old billionaire and chairman of eyewear giant EssilorLuxottica, rattled Italian finance last month when he unexpectedly became Mediobanca’s third biggest investor, snapping up a stake in the bank.

He urged Mediobanca to build its investment banking business and grow through M&A, relying less on consumer credit and its prized asset, a stake in Italy’s top insurer Generali.

But Mediobanca CEO Alberto Nagel, who is due to present a new business plan on Nov. 12, told a conference call that his growth strategy was based on organic assumptions.

“The good thing about us is that we are able to produce interesting results without being forced to do M&A,” Nagel said, adding that the governance of the bank was well regarded.

“For the new plan we want to stick to today’s strategy because this strategy brought good results. Of course, it can be improved.”

Nagel also said he was open to discussing proposals with all shareholders, including Del Vecchio.

SUSTAINABILITY

After posting its best first-quarter net profit in three years, Mediobanca said the results confirmed the “distinctiveness and sustainability of its business model.”

Sources have said Del Vecchio wanted to change the bank’s by-laws to have a say in the choice of the next chief executive when Nagel’s mandate expires next year.

The bank’s by-laws state that the CEO must be picked from among managers who have been with Mediobanca for at least three years, effectively excluding outsiders.

Mediobanca’s net profit in the first quarter of the 2019-2020 fiscal year was 271 million euros ($301 million), up 10% from a year ago and above an analyst consensus compiled by the bank of 250 million euros.

Revenues grew 7% to 684 million as net interest income rose by 4.4%, driven by consumer banking and wealth management, while corporate and investment banking was little changed.

Generali, in which Mediobanca holds a 13% stake, contributed revenues of 135.5 million euros, up from 98 million euros a year ago, thanks to one-off gains in its first-half results.

Mediobanca’s CET1 core capital ratio, a measure of financial strength, was 14.2%, up 8 basis points from the end of June. ($1 = 0.8987 euros) (editing by Silvia Aloisi and Alexander Smith)

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