We can no longer speak of the banking system: the situation of Italian banks is now increasingly diversified and ever more divergent. In other words, there are banks that "will have a future" and other banks that "will have a difficult future". This is the photograph of the 18th report on the financial system of the Rosselli Foundation which states: "it is not (and will never be again) true that banks large or small, efficient or badly managed, all substantially present a similar and discrete profitability, as instead happened in the lost paradise of the past decades, in a stable and scarcely competitive and innovative context”. The decline in profitability that we are experiencing is in fact not cyclical but structural and the crisis has only accentuated it. The numbers are clear: The ROA (return on assets) for 2011 is at 0,1%, the lowest in the last fifty years. And for the first time, after taxes, he tested negative. In 2012, the consolidated profit of the banking groups decreased from 5 billion euros in 2011 to just one billion, which transforms into an aggregate loss of 1,8 billion if the write-downs on goodwill are added. Moreover. While Italian banks have shown themselves to be reliable overall, the report notes that there can be no long-term stability without profitability. The report thus indicates the "rapid recovery of profitability as the real challenge for the banking industry for the next few years, otherwise the sector itself will be sustainable over time".
STABILITY AND PROFITABILITY, THE ESSENTIAL COMBINATION
The report confirms the overall robustness of Italian banks: the best quality capital, according to Bank of Italy data, rose to 10,7% from 7,1% of assets and for the top five large banks to 10,9% % from 5,7%. Furthermore, this strengthening has not been "doped" by public aid. Italy is last in Europe for state aid to banks: including Mps, the support is equal to 0,3% of GDP, while in Germany it is 1,8%, in Belgium 4,3%, in the Netherlands 5,1% and in Spain 5,5%, up to 40% of Ireland. According to the editors of the report, professors Giampli Bracchi and Donato Masciandaro, at the end of 2010 the Italian institutions overall needed around 30 billion euros of greater capitalization while today, with the many consolidation operations carried out, the need would be around 9 billion , with 5 billion in capital increases that would already be in the launch phase. In any case, the road is uphill: "Some banks will struggle: who will give them the money?", said Bracchi, president of the Milan Polytechnic Foundation, explaining that "in this phase of the crisis, it is difficult for the market to respond well and, given what countries have done on paper that are much more liberal than us, public intervention must be taken very seriously".
But if on the one hand the system has demonstrated a good level of systemic stability, showing itself to be reliable with only one case of major corporate instability (Mps), on the other hand the continuing uncertainty of the economic situation has undermined the systemic reliability in terms of capacity to offer credit, with a reduction in credit to businesses of 5% on an annual basis. "We must now acknowledge the ineffectiveness that the abundant injections of money at minimum interest rates implemented by the ECB are having in terms of credit for SMEs" states the Report, underlining that local commercial banks do not have "sufficient incentives to create significant doses trade credit again” for various factors: the expected remuneration from the credit activity does not cover the perceived risk; risk aversion has increased; increasing credit means increasing the raising of equity capital, which is particularly difficult until banks are viable without help from the ECB. The report then explains: "Sufficient profitability is therefore a necessary condition for both financial stability and credit recovery". The effectiveness of a brokerage model is in fact expressed through the two parameters stability and profitability according to an "inescapable binomial", where "one cannot resist in the long run without the other".
THE ACTIONS TO BE TAKEN: CUTTING OPERATING COSTS
Specifically, the report identifies three causes to explain the decline in profitability which is destined to continue: 1) the structural fall due to a significant reduction in all revenue components with the interest margin currently at 30% of the maximum level achieved in 1990 and the intermediation margin of 2011 equal to 39% of the maximum level of 1986; 2) the lack of a significant recovery in productivity with the reduction in costs which was only fractional to the strong fall in revenues, so much so that the cost/income ratio is today the same as it was in the mid-70s (about 70%), with the branches have grown too much both with respect to banking activity (productivity index equal to 108,5 for Italy compared to 183,6 for the EU, 184,4 for Germany, 453,3 for Sweden, 762,2 for Great Britain) and the GDP (productivity index 44,7 for Italy compared to 51,4 for the EU, 61,1 for Germany, 136,6 for Sweden and 126,5 for Great Britain ); 3) the cyclical drop in credit quality.
In this context, the analysis carried out in the Report indicates that, since a trend reversal is not foreseeable either on volumes or on interest margins, additional revenues could derive only from services not linked to the interest margin. These are therefore activities such as asset management, insurance and pension products, private banking. However, assets that several troubled banks have recently been forced to sell to meet the new capital requirements. It is therefore necessary to turn attention to the "recovery of productivity, achieved through an incisive cut in operating costs". There is ample room for improvement here: from staff reduction to supplier rationalization, from consumption reduction to process digitization. Technological innovation, together with internationalization, in fact represent the two virtuous paths to be taken indicated by the study.
THE NEW NATIONAL AND EUROPEAN SUPERVISION
In this scenario, there are at least two economic policy designs that can help: the structure of taxation, and a reminder has also recently come from the IMF; the new design of supervision with the banking union. In fact, the report points out that another efficiency shock could come from the new architecture of European and national supervision: the European supervisory system will represent the keystone of the future Banking Union. For the Report, the active action of banking supervision must be re-evaluated, it can count a lot in terms of final performance with the ECB "must have the same powers as a full-fledged banking supervisor". Furthermore, it is important that the policy of the rules is "cross-eyed", i.e. increases the solidity of the banking system in the long term without accentuating its difficulties in the short term. To improve the financial situation, starting with the banking system, "Europe can actually do very little - explained Masciandaro, full professor of Economics at the Bocconi University in Milan - at least as long as the Federal Reserve continues to drug the markets with liquidity and it seems to me that there are conditions for it to do so until the next US presidential elections”. The challenge therefore lies in the new control rules on the banking system “because by now it is clear to everyone that the EBA has failed, starting with the management of the stress tests. The problem is that Europe has now taken a big risk in concentrating all powers – those of monetary issuance, supervision and crisis resolution – in the hands of the ECB alone while they should be rigidly divided by Chinese walls”.
