All agree, for once: the engine of January Taurus was the banks. The big names in the system, Intesa and Unicredit, have recorded a gain of more than 10 per cent since the beginning of the year, like Mediobanca, Banco Popolare exceeds 15 per cent, even double the leap of Monte Paschi. And the Big names in management are reviewed en masse, starting with Black Rock which has acquired 5 percent of Ubi. Suddenly, in short, the picture is reversed. But is there any method in this apparent madness? There is, assures Professor Marco Onado, professor at Bocconi, former Consob commissioner and great banking expert. But it is said that the rise in bank stocks has good legs.
FIRSTonline – How do you explain the bounce?
Onado – Simple: it is a mechanical effect. Before, the banks suffered a vicious circle, conditioned by the skyrocketing spread, which crushed the quotations of the government bonds in the portfolio, forcing continuous price revisions on the basis of the mark to market rule. Today, on the contrary, the opposite effect is triggered: the drop in the spread acts as a springboard for a rebound that can even go beyond the fundamental values.
FIRSTonline – But will it last?
Onado – First of all, as the ECB pointed out, we are certainly not sheltered from a possible surge in the return of the spread, especially if certain post-election behaviors prevail. But, beyond the cyclical data, we are certainly not facing a trend reversal. The real problem for banks is the growth of credit risk provisions. Obviously, I don't have the data for all of 2012 yet, but in 2011 the result of the system was a little higher than the sum of the provisions for the two previous years.
FIRSTonline – Has the trend continued?
Onado – Everything suggests that the phenomenon is not fleeting. If so, we'd be on horseback. Otherwise it will be quite a joke.
FIRSTonline – Why?
Onado – Because the profitability of the system has slipped to historic lows, one of the effects of the extremely low rates. Hence the need for robust interventions so far more announced than implemented.
FIRSTonline – That is?
Onado – It is clear that action will be needed on the counters and on personnel measures which, for understandable reasons, have been postponed until today.
FIRSTonline – From here it is easy to predict that the system will ask for the intervention of the State. Regarding the deduction of losses from a tax point of view.
Onado – Logical and rationally sensible request. It remains very doubtful, however, that the public coffers have the capacity for such a choice.
FIRSTonline – It could be time for the big leap: less bank, more stock market or more bonds out of the credit fence. Or not?
Onado – Unfortunately, the size of our companies always makes it difficult to use the bond instrument, as can be seen from the results of the latest experiments. As far as the Stock Exchange is concerned, the data speaks volumes: few quotations and, in some cases, more with the logic of take the money and run than for a development plan. But here it is the fault of the companies even more than the banks.
FIRSTonline – Will the foreigners come?
Onado – I do not see this crowd at the borders of investors.
FIRSTonline – And will Italian banks go across borders to assist exports?
Onado – On the contrary: I believe they will have to preside over the domestic market and recover the relationship with customers. I think the example of Unicredit has made school: international expansion has not done well.
FIRSTonline - How do you rate local bankers? It is impressive to read the derivative contracts stipulated by the old Mps management with Deutsche Bank. Were they understandable moves?
Onado - We don't make a bundle of every herb. Of course one of my students, after a couple of exams, knows how to avoid certain mistakes.
FIRSTonline – What should the new majority do after the elections regarding banks?
Onado – We need immediate action in the direction of credit support for businesses. It is not a matter of demagoguery, but of indicating a precise trend line. Fabrizio Barca impressed me a lot when he said on TV: in Aquila people didn't ask me for money the next morning. But he wanted to know a credible date on which the interventions would take place. The country does not ask for miracles, not even those shouted during the electoral campaign. Calls for a reliable policy.
