Mediobanca targets acquisitions in wealth management drive

MILAN (Reuters) - Italian investment house Mediobanca MDBI.MI plans to use 1 billion euros ($1.1 billion) of excess capital for acquisitions over the next three years to expand its wealth management business and boost fees.

Three years ago, Mediobanca decided to bet on traditional banking and started dismantling a portfolio of stakes in Italy’s top firms that had made it an influential powerbroker at the heart of the country’s business community for decades.

Presenting a new three-year plan on Thursday, Mediobanca said it would push ahead with planned equity disposals worth 1.3 billion euros, including a reduction of its stake in insurer Generali GASI.MI to 10 percent from 13 percent.

Chief Executive Alberto Nagel said the holding, which is worth 2.4 billion euros now, could even be cut below 10 percent if Mediobanca needed to fund a large purchase.

“We’d rather not make a single big acquisition but we may review this approach if we felt strongly about an asset,” he told reporters.

The bank wants to double the share of fees from wealth management to 40 percent over the next three years. Fees will account for 30 percent of total income in 2019, up from 22 percent in the year to the end of June.

“We’re aiming for an even deeper transformation than the one undergone so far to face the major challenges coming from a weak and volatile macro environment, more stringent banking rules and ever-changing technologies,” Nagel said.

Mediobanca, which bought British credit manager Cairn Capital and Barclay's BARC.L Italian branches last year, also said it was acquiring full control of Italian private bank Banca Esperia by buying Banca Mediolanum's BMED.MI 50 percent stake.

Mediobanca shares were down 2.6 percent by 1100 GMT (6:00 a.m. ET), outperforming the Italian sector .FTIT8300 slightly. The stock has lost 25 percent this year, about half the sector's loss.

“The group is focusing on its areas of strength (retail, corporate investment banking), and plans growth in an attractive area (wealth management),” Citi said in a note. “Targets (are) above consensus but not overly challenging.”

Nagel said Mediobanca could buy companies similar to Cairn outside Italy while its focus at home would be on strengthening its wealth management sales force.

A network of family bankers will help Mediobanca’s retail division CheBanca! provide investment advice to clients. It has gathered 12 billion euros in deposits since its creation in 2008, helping to provide liquidity during the financial crisis.

Nagel also mentioned non-performing loan management as an area of interest for possible acquisitions, allowing Mediobanca to exploit skills developed by its Compass consumer credit unit.

Mediobanca is targeting a risk-adjusted gross operating profit of 1 billion euros by mid-2019 up from 0.7 billion euros last year.

Editing by David Clarke