Compared to thirty or forty years ago, today in Italy there are few companies and banks that can still boast a research office of great importance, both in terms of the number of researchers and the quality of the studies and research they produce. To be clear, apart from the research office of the Bank of Italy which falls within the institutional functions of the central bank, in Italy there are only two large prominent research offices: that of Mediobanca and that of Intesa Sanpaolo. The media pay little attention to the internal reality of these idea factories but understanding what their mission really is today, how they work and how they relate to the activity of the bank to which they belong is of great importance. This is what we asked Intesa Sanpaolo's chief economist, Gregorio De Felice. Here is the interview he gave to FIRSTonline
Doctor De Felice, Intesa Sanpaolo Research is today recognized as one of the major research offices among Italian companies: what exactly is the mission that the bank has assigned you?
“Our mission, expressed very succinctly, is to contribute to the creation of added value for the bank through the production of impartial, independent and high-quality research, intended both for internal needs (I am thinking, for example, of budget or at risk meetings) and to institutional, corporate and retail customers. We also have the ambition to contribute authoritatively to the debate on the most relevant international economic issues and on the most critical structural issues of our country".
Compared to the legendary research office of Comit, which made use of highly prestigious collaborations - such as that of Mario Monti - and was then absorbed by Intesa Sanpaolo, the evolution of the model is evident: more theoretical and more macro than that of the past and today's more operational and more linked not only to the economy but also to the scenarios of industry, territories, banking and finance. When did the change of pace and repositioning happen and why?
“In reality, the “mythical” Comit Research Office (as you define it, and it was in fact such) was born in the early Thirties from an intuition of Raffaele Mattioli who, entrusting its leadership to Antonello Gerbi, wanted to assign him a role crucial in the organizational restructuring of the bank. Gerbi wrote in 1949 that: "The whole art of a Research Office lies precisely in balancing the needs of good information with those of a quick response to everyday needs".
The years of Monti, who collaborated with various conductors (and among these I have a very vivid memory of Vittorio Conti, to whom I owe so much for his teachings and for the trust he always showed in me), stand out for his great capacity for theoretical elaboration , which have always been followed by important economic and monetary policy proposals. I am thinking, for example, of the insights included in the magazine Tendenze Monetarie: the measurement of Total Domestic Credit, the definition of CCTs as "banknotes with coupon" and, therefore, of the new monetary aggregate M4, but also the criticisms aimed at the policy makers of era on the use of the portfolio constraint and the ceiling on loans. Finally, I am pleased to recall the Comit indices, developed as early as the Seventies: the Comit 30, presented to the market in 1992 and sold a couple of years later to the Italian Stock Exchange, was to all intents and purposes the "father" of the current FTSE MIB”.
What changed with the privatization of Comit and the other two banks of national interest?
“The Research Office was called into question because some believed that its main areas of analysis were not fully in line with the needs of the bank. Enrico Beneduce (at the time one of the two Managing Directors) wanted to make a positive change: in 1995 I was called to direct what was then called the Financial Studies and Analysis Office, in which the research structure had been incorporated which, previously in the field of the Securities Service, followed the stock and bond markets. The attention of the Office and its analyzes shifted towards operations: the first daily bulletins were launched on newly released or soon-to-be-published macro data, daily morning calls, participation in risk meetings, .... The transformation in an increasingly "operational" sense then accelerated with the mergers that led to the birth of Intesa Sanpaolo. The territorial and industrial district analysis has found, for example, a convinced supporter in Corrado Passera. The research was then extended to emerging markets and, in particular, to the 12 countries where subsidiaries of the Intesa Sanpaolo Group operate. With the current CEO Carlo Messina, Research's involvement in budget processes, planning, the definition of business plans and risk assessments has further increased".
How is Intesa Sanpaolo Research organized today, what are the main research lines, how many researchers work there?
“Research can now count on around ninety collaborators, including analysts, economists and editors. The organizational model is centralised: practically all research activity with characteristics (as I mentioned before) of impartiality and independence is concentrated in our organizational unit. The lines of investigation are decidedly numerous: they range from macroeconomics (which covers both advanced and emerging economies), to financial markets (government bonds, currencies and commodities), to banking systems, to analyzes of industrial sectors, and local public services. , on territorial economies. Increasing space is allocated to research on issuers of financial instruments traded on Italian and foreign markets, as well as on unlisted companies subject to IPOs. The latest ongoing project concerns the extension of coverage of the main European stocks: by the end of the year, we will be able to follow around 80 non-Italian companies".
Who are the final recipients of your research and studies? Do they have mainly internal purposes within the bank or are they also externally oriented?
“Our activity is oriented both to internal needs and to external stakeholders. Let's start with external customers (institutional, corporate and retail): a very vast range of publications is dedicated to them, in Italian and English, which cover practically all areas of investigation. We also find strong interest in our research from institutions, the academic world and trade associations or other private research centers, with which we maintain fruitful collaborative relationships. Internal customers absorb a significant portion of our work: I could actually say that they represent our main client, to whom we provide scenario analyses, forecasts, contributions to strategic planning, but also daily briefings with sales and operations rooms. Furthermore, participation in numerous internal committees, dedicated to both risk analysis and the design of new products, has progressively consolidated. Finally, there is a significant component of business support in the relationship with customers, always, obviously, respecting the principle of independence which is an essential characteristic of investment research".
How do you explain that, unlike what happened until the 90s when among Italian public and private companies there were glorious research offices (in addition to yours and before that of Comit, that of Mediobanca, Credito Italiano, Fiat, of Olivetti, Eni, Montedison, Pirelli and others), today there is a desert and in the large Italian companies the relevant research offices are only yours and that of Mediobanca while on the institutional level only that one remains of the Bank of Italy?
“I would not like to go into the merits of other research entities which, however, still exist in Italy, each with its own characteristics and specificities. I answer for Intesa Sanpaolo, taking up an anecdote that dates back to the mid-nineties. When starting the restructuring of the Research Office, which I mentioned earlier, Enrico Beneduce invited us to literally "overturn" the operations, dedicating 80% of the efforts to the needs of the bank and the remaining 20% to the research activity . I believe that here lies the key to understanding the centrality of our role in the company: the ability to meet the needs of the business, leveraging consolidated theoretical analysis skills. An example: our studies on production chains have contributed to the birth of supply chain contracts which, through the involvement of the lead company, ensure even smaller companies have the possibility of enjoying better credit conditions and greater investment opportunities.
Then there is another important point: as our CEO often reminds us, Intesa Sanpaolo is one of the most important institutions in Italy. Such a significant role requires analytical and processing skills that allow it to insert itself authoritatively into the economic debate and intervene on the country's crucial issues. This, I believe, is the second reason that motivates the existence of a research unit with the characteristics and complexity of that of Intesa Sanpaolo: it is no coincidence that it is explicitly mentioned in our mission".
What effect will Artificial Intelligence have on your study and research activity and what will be the objectives and next stages of your evolution?
“There are several areas in which Artificial Intelligence is already changing the way we work: for example translations, document synthesis, bibliography retrieval, writing code to automate procedures, drafting reports (in terms of improving style, suggesting titles...). Looking ahead, AI will allow us to save time dedicated to activities that we could define as "accessory" but which are still indispensable for carrying out research: for example the analysis of data and press releases, modelling, the automatic creation of presentations from documents " vertically". All this will increase the efficiency and productivity of analysts and economists, improving their decision-making ability.
However, we must not forget that economic and financial analysis are not exact sciences, and that evaluation is not a deterministic process. Thinking for example about equity research, there are no "black boxes" from which, by "inserting" the numbers inside, it is possible to extract the correct value of a company. Evaluation is a process based on qualitative and quantitative elements, combined with a large dose of subjective judgment, experience and common sense on the part of the analyst. The latter are the best guarantee for investors, and they always will be: no model, no matter how complex, and no chatbot, no matter how advanced, will be able to replace them".
From your observatory, what predictions have you made on the performance of the Italian economy for the whole of 2024? Will we continue to grow more than France and Germany but will we have to resign ourselves to lower wages and what are the most urgent reforms for a leap in quality of our economy?
“Italy is experiencing a positive moment compared to other European economies. GDP growth, from the end of 2021 to the forecast for the end of 2024, is equal to 6%, compared to 4,7% in the Euro Area, 4,4% in France and just 2,1% in Germany. This change of gear is linked to the strong recovery in investments which between 2016 and 2023 recorded an increase of 35,7% in Italy, much better than France (+19,2%), Spain (+14,3%) and Germany (+4,5%).
Industry 4.0 (since 2017) and Superbonus (since 2021) explain this result, a synthesis of the leap in construction (+47,1% in the period 2016-2023), but also of the dynamics of investments in machinery, means of transport and ICT (+ 29,3%) and in intangible assets (R&D and software, +20,2%).
Starting from the second part of the year, we expect a recovery of the Italian economy which will be able to count on the contribution of consumption with families who have recovered purchasing power thanks to the easing of the inflationary flare-up. Investments will recover with the reduction of interest rates and the implementation of PNRR projects, with potential positive repercussions on the relaunch of infrastructure and the digital and green transition.
Wages in Italy are lower than elsewhere in Europe, highlighting an increasingly less sustainable situation. A strong increase in productivity and a reform process that makes it easier to do business in our country is essential. Ultimately, an increase in the potential growth rate of GDP can trigger a virtuous process that also benefits workers."
