Dateline-Milan: Fall of Italy's high priest of banking

ON THE surface nothing has changed. Each weekday morning Enrico Cuccia, the 91-year- old high priest of Italian finance, leaves his Milan apartment shortly after eight. His hunched figure in navy wool coat with matching hat and cashmere scarf moves purposefully across the piazza in front of La Scala opera house to his office at No 10 via Filodrammatici, the headquarters of Italy's only real merchant bank, Mediobanca.

But the dramatic events of the past month mean Cuccia, who has pulled the strings of Italian finance for half a century, is no longer the puppet master; his marionettes have begun to move by themselves and he risks finding himself sidelined.

Sunday is normally a sacred day of rest for Milan's driven financial community. But by the evening of 21 March, two friendly takeover bids by Italian banks totalling $26bn had changed Italian credit for ever.

Unicredito Italiano, the country's biggest bank in market capitalisation, launched a $16.4 play for its rival Banca Commerciale Italiana, to create "Eurobanca", to become Italy's largest financial institution.

Hours later that record was broken when Turin-based San Paolo-IMI, Italy's biggest bank in terms of assets, had offered $9.7bn dollars for Banca di Roma. Both share-swap deals depend on shareholder acceptance and approval by the stock market watchdog. Never had two such massive deals been struck without the blessing of Enrico Cuccia. Mediobanca had been gambling on a merger between Banca Commerciale Italiana and Banca di Roma. As the deals were finalised, Mediobanca executives were barricaded in their 16th-century palazzo headquarters with the press outside. Cuccia had forgone his usual Sunday afternoon tea at the Caffe Ambroeus in a desperate attempt to orchestrate a counter-attack.

The deals mean a transfer of power that would seriously undermine the independence of the merchant bank and leave it exposed to predators. Sixteen per cent of the capital of Mediobanca would be in the hands of Unicredit- Comit and 8 per cent with San Paolo-Banca di Roma.

The irony was that Enrico Cuccia, who countless times bailed out the big names of Italian industry, from Agnelli to Ferruzzi to Pirelli, now has to try to save himself.

The enigmatic Sicilian banker is arguably the most influential economic figure in postwar Italy. Mediobanca was born on10 April 1946, on the initiative of the liberal banker Raffaelle Mattioli. Cuccia, already identified as a financial whizz, was put in charge.

Its aim was to serve the needs of industry after the Second World War but Cuccia soon widened that brief, turning it into Italy's first merchant bank during exceptionally rapid growth in time for Italy's "economic miracle" of the Sixties.

Cuccia forged alliances with the big family dynasties of Italian capitalism. The Agnellis of Fiat, the Pirelli tyremakers, the Ferruzzi agrochemicals empire, the DeBenedetti family at Olivetti were all part of what became known as the salotto buono - the exclusive drawing room of Italian industry. Cuccia protected them from foreign predators and from the state. He also set up a complex web of cross-shareholdings that linked the various planets in the Mediobanca galaxy.

These inter-related companies would support one another in times of difficulty and avoid having to resort to share issues or bank loans.

Giuseppe Turani, editor of Uomini e Business magazine, says: "Cuccia ensured the various figures on the economic scene didn't scrap among themselves. He decreed when someone should make an exit, certainly not competitors or the free market.

"Secondly, when a group was in deep crisis, everything came to a halt and Cuccia moved in. He had a good look at the books, called in the banks (often ordering them to provide credit or underwrite highly risky recapitalisations) and at times he sorted out new managers."

Crucial to Cuccia's overall strategy were the three then state-controlled banks, the Banca Commerciale Italiano, Credito Italiano and Banca Nazionale del Lavoro. They held stakes in Mediobanca and could be called on to provide cash when required. The relationship was perverse; instead of shareholder banks controlling Mediobanca, Cuccia issued the orders.

The success of Mediobanca was due to Cuccia's extraordinary financial acumen but also his personality. He has never given an interview and attends public functions reluctantly. Photos of Cuccia, with his heavily lidded eyes, high forehead, thick lips and hunched shoulders are rare. There is an underground tunnel that links Mediobanca to the next door palazzo, allowing staff and clients to come and go without being noticed.

Among the few journalists to have met Cuccia is Piero Ottone, a former editor of Corriere della Sera.

He said: "[He is] a man of exemplary integrity and rigorous principles in his personal life, who received a modest salary and conducted a modest lifestyle, although he backed some dubious characters. When told he'd supported someone that he himself defined a thief, he would point to the chairs on which his visitors sit, saying, 'If you only knew how many rotters have sat there'."

Ottone says much of the enigma of Cuccia can be explained by his deeply ingrained Sicilian culture. "That demands absolute loyalty in exchange for loyalty. To the men he supported he would forgive almost anything, but not betrayal."

Critics say Cuccia hampered competition, prevented Italian companies from "growing up", stopped the banking sector from developing and sold minor shareholders short. Romano Prodi, the recently nominated President of the European Commission, once described the power of Mediobanca as "a threat to economic democracy in Italy".

For some commentators the advent of European Monetary Union sounded the death knell of the Cuccia-Mediobanca- Italian capitalism system. Cuccia's flaw, they argue, was pride, thinking he could resist change rather than adapt to it.

They also point to the deterioration of two specially close relationships; with Italy's most powerful family, the Agnellis, and with Lazard Freres.

For years Cuccia had a close rapport with the mythical Andre Mayer, Lazard's founder. The two banks share control of Assicurazioni Generali, one of Europe's biggest insurance firms, but the relationship has turned frosty. When one of Mediobanca's most promising middle managers Gerardo Braggiotti, was sacked in December 1997, he became senior partner in Lazard. Proof that loyalties no longer lie with Cuccia showed when Fiat helped to organise the San Paolo-Banca di Roma deal - it holds shares in both - and Lazard brokered the Unicredito deal.

Many point the finger at Mediobanca's managing director, 61-year-old Vincenzo Maranghi, Cuccia's dauphin. They say he lacks vision, makes strategic errors and is responsible for a run of failures that marked the decline in Medio-banca's power. Apart from snubbing Umberto Agnelli, brother of patriarch Giovanni, and irritating Deutsche Bank, Maranghi has also made enemies in much of the banking establishment.

"Cuccia is arrogant but he is a genius," said Fabio Tamburrini, author of A Sicilian in Milan, a biography of Cuccia. "Maranghi has always displayed incredible arrogance while making mistake after mistake."

More signs that Mediobanca was waning came with the failure of the 1996 Supergemina project, a fusion that would have saved the Ferruzzi group, another family holding. The revelation of massive losses in Gemina and the intervention of a magistrature thwarted that.

Last year, Piero Marzotto opposed the marriage, matched by Cuccia, of his textile group with another conglomerate, HDP. And a two- year campaign to wed Banca Commerciale and Banca di Roma failed acrimoniously the week before the Unicredito and San Paolo deals. If both mergers proceed, there are question marks over the future of Cuccia and the bank he founded.

Should he step aside, there are no obvious successors. Conflict with Maranghi has seen an exodus of top management since 1996.

Whoever is in charge, Mediobanca will change. It may try to carve a strictly merchant banking role, divesting itself of its stakes in Italian companies. If it is the subject of a takeover bid, it could divest itself of only minor holdings, remaining essentially as it is, but fused with the raider.

"It's not a large or structured organisation," says Fabio Tamburrini. "There are only 300 employees. It's a boutique so it will be difficult for them to compete solely in that sector."

There are jewels in the Mediobanca portfolio. It holds strategic share packets in appetising companies such as Generali and SAI (insurance) Pirelli (tyres) Compart(chemicals) HDP (media and textiles) Falck and Fondiaria (steel). The presence of Cuccia has always been a protection for these companies against marauders. In future their only defence will be staying competitive and seeking strategic alliances themselves.

Suggested Topics
News
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food and drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
Voices
A Siberian Tiger
voices
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
science
News
people
Life and Style
President Obama, one of the more enthusiastic users of the fist bump
science
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
tv
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Java Developer - Banking - London - Up to £560/day

£500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...

HR Business Analyst, Bristol, £350-400pd

£350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

Account Manager - (Product & Account Management, Marketing)

£26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried