Van Miert wins little support for banking probe

Date: 20/03/1997

COMPETITION Commissioner Karel van Miert is treading an apparently lonely path in deepening his probe into Italian salvage plans for ailing public bank Banco di Napoli.

Van Miert's announcement that the European Commission would have to carry out further studies into Banca Nazionale del Lavoro's (BNL's) part in a joint bid for the biggest bank in southern Italy has roused little support either from the country's small private banking sector or from foreign banking analysts.

Van Miert has demanded assurances from the Italian treasury, the biggest shareholder in BNL, that it can bear the burden of saving Napoli without creating problems for itself which might require a bigger state bail-out in the long term. In his letter, the Commissioner emphasised BNL's low level of profitability.

Southern Italy's largest bank all but collapsed two years ago after losing 1.6 billion ecu in 1995. The Italian government pumped 1 billion ecu into the bank to keep it afloat while it arranged a long-term solution.

BNL, Italy's fifth-biggest bank in terms of own funds, and the mainly privatised insurer INA together won an auction to buy a 60&percent; stake in Banco di Napoli.

They intend to relaunch it as part of BNL with around 670 million ecu in fresh funds. The two firms are also considering a wider marriage to form Italy's biggest bank-insurance group and have already committed themselves to a modest exchange of assets, with BNL swapping its insurance arm BNL Vita for INA's small bank, INABanca.

Private sector observers say BNL's profit figures are not exceptional, but add that it has made large strides in recent years to become a well-managed bank. “It is about midway in the process,” said one specialist.

Others point to INA's participation in the deal as security that it will not turn sour. “INA is extremely well capitalised and very profitable,” said one. “The deal is a big challenge, but if they do it well, it makes sense.”

For BNL, the Banco di Napoli take-over will give it a regional stronghold for the first time. Unlike most of its rivals, BNL currently has a thinly spread national network.

Two factors are muffling any banking sector complaints about possible state aid in the Banco di Napoli take-over: the fact that most of Italy's banking sector is in public hands, with a heavy central, regional or local government presence; and the fact that most accept some restructuring of the sector is overdue.

Insiders claim that no complaints about the Banco di Napoli rescue plan are likely from the small club of private banks.

Only last week, BNL announced a 1996 net profit of 45 million ecu to be distributed to shareholders, up 15&percent; from the 40 million ecu of 1995. Profits in 1994 and 1993 were around 25 million ecu.

The bank says its strategy has not been to boost profits for shareholders, but to increase its own capital.

“Throughout the 1990s we have had a substantial growth in profits, most of which has been ploughed back into the bank,” said a spokesman.

BNL further strengthened itself by injecting another 145 million ecu from 1996 extraordinary earnings. It has a more than respectable ratio of own capital to loans of over 10&percent;, well above the international Cooke Ratio standard of 8&percent;.

Within Italy, the bank has been adding extra branches (with 34 more opened in 1996), while cutting staff numbers by more than 2&percent; from 20,266 to 19,834.