Mediobanca's rise and fall after the release of Unicredit

UniCredit has decided to sell Mediobanca's shares, which it has in its portfolio since the dawn of time. The value is lower but not too much per billion euros. UniCredit continues to sell its investments together with a substantial capital increase launched a couple of years ago. But the "real" news is not this one, but another.

Go back in time. Twenty and more years ago it would not have been even conceivable that one of the three National Interest Banks – Credito Italiano, Banca di Roma, Banca Commerciale – could sell the share of shares it held in Mediobanca. Which last was not a shareholder of the three banks, which, on the contrary, were its shareholders, but these, the controlling companies, would not have dared to move independently. Why did things go this way?

Let's go back to the thirties (no less). The so-called "mixed" banks – Institutions which, in addition to ordinary credit, also provided the longer-term credit, and finally had shareholdings in the companies that were their customers – they had a great role in forcing the industrialization of Continental Europe in the nineteenth and early twentieth centuries. The real investments were forced well beyond the level that would have been possible with the sole self-financing and with the capital contributions of the members.

If a bank provides a company with a long-term credit that finances by collecting short-term deposits, ie if it has long-term receivables against commitments that can be recalled instantly (sight deposits), it may happen that yes find mismatch if long-term credits are not "quality". If the credits are not of quality, and the bank is also the debtor's shareholder, it may happen that it is tempted to intervene by subscribing to the capital increases. But if the bank does not have sufficient capital coverage of its own, it exposes itself even more. After the Great War and during the Great Depression these problems exploded. Industrial companies were doing badly and banks were too exposed. Thus in Italy mixed banks were saved.

In 1933, the Institute for Industrial Reconstruction (IRI) was founded, which bought both banks and companies whose banks were shareholders. The idea was that, after the rescue, everything would return to the private sector. The initial idea was therefore that of a statism pro tempore. Instead, the Second War comes, the privatization is postponed indefinitely, with the economy again badly set.

In 1946 it is the turn of Mediobanca, which is, on closer inspection, the virtuous fragmentation of the mixed bank. Meanwhile, long-term loans are no longer financed with sight deposits, but with savings deposits, or with bonds, so there is a credit against a debt of equivalent duration. Then the actions and obligations of client companies can be placed, to strengthen them financially. Finally, you can have direct investments in shares, but strictly contained in relation to risk capital.

Doing so, you do not have the defects of the mixed bank, but you have the advantages: real investments can be forced beyond the self-financing of the companies and the contributions of the members. When it was said with a pop expression that in Italy there were "capitalists without capital", this was meant.

Mediobanca was established as a member of the National Interest Banks that ended up in IRI, which, in addition to venture capital, provide Mediobanca with their network of agencies for the collection of savings books and bonds. Mediobanca is therefore born lean, because it does not need a commercial network for its collection. And it remains streamlined also in the placement of the shares and corporate bonds, because these are absorbed again by the banks' agencies.

After a few years Mediobanca becomes the protagonist of Italian finance, note a finance aimed at financing business investments. With time, commitment as a shareholder also grows. We have thus come to the "hard stones". Mediobanca allied itself with its own shares when necessary, in order to provide stability and continuity. In the case of Generali, the story was different. His firepower (the size of his assets) compared to Italian companies was such that, if needed, they could take the necessary participation. It was not necessary to take it, the threat was enough. The Generali was like the "Great Berta", it was there huge and threatening even if it didn't fire, hence its importance. This system continued until the 1990s. He kept up what he could, if one takes into account the crisis that has manifested itself in Italy since the seventies.

The system that gave birth to Mediobanca was directed above all by southern intellectuals: Beneduce, Menichella, Mattioli, Tino, Maccanico, Cuccia. They had emerged during Fascism, but they were not fascists, and their legacy lasted until not too long ago. The virtuous crushing of the mixed bank – that is Mediobanca – had as protagonists the servants of the state that defended the perimeter of the private initiative.

The Mediobanca system is gradually scaled down. This has been happening since the 1990s, when ordinary credit banks can once again act as mixed banks. At that point – when shareholders – they find themselves in conflict with Mediobanca in the placement of the shares and bonds of third-party companies. Furthermore, the hard stone system has proved costly, because it commits capital for systemic reasons, but the committed capital can be unprofitable. The near monopoly falls during the placement, as does the system of hard stones to keep the system cohesive.

And we are back today.