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Mediobanca CEO says benchmark value for its Generali stake is €17-18 per share

by Antonella Olivieri

The future of insurer Assicurazioni Generali remains a hot topic for the markets, with many questions asked during the conference call with Generali largest shareholder Mediobanca CEO Albergo Nagel to discuss the bank’s quarterly earnings.

Italian bank Intesa Sanpaolo has said it is interested in a merger with Generali, raising questions about whether Mediobanca would sell its stake.

Nagel kept his answers focused on already-known issues. The three-year plan, approved in November, has confirmed the intention to sell 3% of the 13% stake in Generali.

“We remain in line with what we have already decided, or that Mediobanca as part of the plan expects a sale of capital, aimed at boosting earnings and capital solidity,” he said. “Mediobanca will therefore proceed to sell 3% of Generali by June 30, 2019 and will keep a remaining 10%, which is an important source of earnings per share and dividends,” he said.

When asked about the possible price sought for the stake, the CEO said that the few shares sold by Mediobanca in December 2015 were priced between €17-18.

“If you want, this is a benchmark,” he said. Generali shares yesterday closed at €14.5 (up 0.76%).

In the battle between Vivendi and Mediaset -- Vincent Bolloré and the Berlusconi family's holding Fininvest are both among Mediobanca’s controlling shareholders -- Nagel clarified that “Mediobanca does not back any particular shareholder in transactions that only concern them.”

“My valuation as an investment bank is that takeover deals must be friendly and agreed because statistics shows that hostile transactions are much more expensive and have a higher execution risk,” he said.

The CEO said that there are no signs that core shareholders in Mediobanca want to exit.

“In fact, the opposite is true,” he said. Neither Bollore, nor UniCredit, the main shareholders, have demonstrated any intention to reduce their stakes.

The manager referred to UniCredit’a €13 billion capital increase now under way -- where Mediobanca is part of the underwriting pool -- “a well-thought offering which has received appreciation from investors and which will be successful.”

Mediobanca’s board approved first half results showing a net profit of €418 million, up 30% from the prior-year's period and 10% higher than analysts' average forecasts.

Revenues hit a record €1.072 billion (+6%). The interest margin rose 5% to €636 million, led in particular by consumer credit - the sector margin rose by 13% to €408 million - which accounts for 65%.

Net commission fees rose 4% to €237 million, helped by wealth management - +43% at €90 million- which, after the consolidation of Barclays and Cairn Capital, contribute for 40% to the group's fees.

The quality of the loan portfolio was confirmed by a series of indicators. Writedowns declined by 18% to €184 million, while the cost of risk dropped from 136 to 102 basis points, returning to pre-crisis levels.

This means that writedowns represent only 1% of the loan portfolio on average in the period.

Doubtful loans (55% covered) represent 2.5% of total loans, against the sector's 10.5%.
Bad loans alone (69%-covered) represent 0.4% of loans.