The 360° banker. And about the future…
“illimity was born and continues to be a bank focused on one important thing: credit to SMEs”. Corrado Passera is a prominent figure in the Italian economic and political landscape. After being at the top of Poste Italiane – where he launched Banco Posta – and after leading Intesa Sanpaolo to become the first Italian credit institution, he was Minister of Economic Development and Infrastructure in the Monti government. Today he leads illimity, an innovative bank founded in 2018, which aims to respond to the most complex needs of small and medium-sized Italian businesses, with a model that combines technology, finance and strategic vision.
Doctor Passera, illimity is a young but ambitious company. Why did you decide to focus on SMEs?
Because SMEs represent the beating heart of the Italian economy, but too often the traditional banking system does not adequately support them at key moments. When a company faces a merger, one of the transitions, a moment of extraordinary growth or, on the contrary, a phase of difficulty, credit becomes complex. We asked ourselves: how can we make a difference? The answer was to offer not only commercial and investment banking skills, but also industrial skills. This is why to intervene, especially in cases of corporate recovery and relaunch, in addition to credit experts, we involve sector experts who help us in the evaluation and help companies to draw up a development plan. When you lend in the medium term, it is as if you are investing in that company: you have to know it, understand its plans, support it. This is what we do.
In the first few years you focused heavily on distressed credit. How come?
It was a market with great opportunities – especially in the corporate sector – and it allowed us to grow rapidly. Distressed credit has represented a significant portion of our earnings and business. But conditions have changed: the impact of calendar provisioning, the disadvantaged competition compared to non-banking funds and the natural exhaustion of that market have led us to close the chapter on direct investments in NPE portfolios. We remain very active in the asset management of especially real estate assets through ARECneprix. It was not a simple decision, but a necessary one to ensure growth also in the future given the great potential we see in our fundamental business for SMEs.
What comes after distressed?
Now we focus even more on performing and reperforming credit. This means supporting companies in their growth path, or in extraordinary moments of their life: acquisitions, changes of ownership, strategic transitions, overcoming contingent or structural difficulties. Our growth speed will be further increased by the valorization of our technologies and our Tech Ventures. On several occasions we have indicated our intention to carry out operations capable of creating capital gains and capital to be allocated to the core business with SMEs. Last year it was the turn of the partnership with Engineering which created around 55 million in value in the year as well as the prospect of further royalties in the future. This year it was the turn of the partnership with Apax which creates 54 million of immediate value and further benefits in the future.
Technology is a pillar of illimity. What have you actually achieved?
We have built a modular banking information system completely in the cloud, the first of its kind in Italy. This allowed us to start with a light and scalable infrastructure and, above all, capable of changing quickly as the market scenario changes. Over time we have developed advanced application solutions linked to artificial intelligence and the cloud that can also be useful to non-banking companies. The two strategic partnerships that we have concretely created demonstrate the interest in our solutions. Thanks to our technologies we are creating further value through the Tech Ventures in which we have invested which will help accelerate our growth.
The stock market, however, does not seem to reward this vision. How do you explain it?
The performance of our stock on the stock market is very unsatisfactory and the distance between the stock market capitalization and what we consider to be the intrinsic value of the bank has widened further. Our start-up has not actually been facilitated in recent years by external events, all negative and objectively unpredictable such as COVID, wars, the explosion of market rates: this last phenomenon has objectively favored traditional banks, but has significantly reduced our spreads, especially on distressed assets. However, we have always reacted promptly and between 2019 and 2023 we never stopped growing both in volumes and profits. We have communicated to the market for some time that we would stop investing in NPE portfolios and we hope to compensate for the lost revenues deriving from this activity with the growth of credit and services to SMEs. We are doing so, facilitated in this by the valorisation of our technology and the Tech Ventures in which we have invested. The new Business Plan has been moved forward to also take into account these extraordinary operations and the conclusion of the board’s mandate.
Looking at the global economic context, what are the main challenges for Europe?
The Old Continent faces enormous challenges: demographics, competitiveness and social unrest first and foremost. We need to restart a phase of sustained and sustainable growth and to facilitate it, powerful investments are needed which can only come from a solidarity and federal effort as almost all national budgets are now exhausted. We also need a more accommodating monetary policy in terms of rates that distances itself, if necessary, from American monetary decisions: for the United States the biggest challenge is still inflation, for Europe the challenge to overcome is to avoid recession and the social and political consequences that the lack of growth would bring with it.
How do you see the evolution of the banking sector in Europe? In Berlin they are setting up barricades to avoid the merger between Unicredit and Commerzbank and, in the past, we have seen negotiations between Fincantieri and Stx stop: how do you explain this?
In the banking sector, as in many other strategic sectors, European companies have now dropped out of almost all rankings and this weakens us enormously against the United States and China, but not only. Regarding credit and finance we need to complete the construction of a single capital market and banking union. Europe must equip itself with at least some global banks and I see UniCredit’s move in Germany extremely favorably: local politics must not block it. In one sector we have demonstrated that we are capable of creating a champion of global tonnage – AirBus -, in others we have missed sensational opportunities – shipyards -, in still others we could lose available ones, I am referring to semiconductors or defence.
Is the challenge of national banking consolidation still relevant?
Italy has done a great job in recent decades: from over 1000 banks to a few dozen banking groups. Liberalization, market opening and substantial privatization have contributed to creating a solid and competitive system. Italy already today has two groups of European dimensions. Third pole? We could say both Poste and Credit Agricole could be considered as such. But BPM and BPER are also very credible candidates. We will see how all these strong market operators will move entrepreneurially also in light of the latest national initiative by UniCredit and the appropriate acquisition of the State in the capital of MPS.
How do you evaluate the announcement of UniCredit’s takeover bid for BancoBpm?
It seems to me to be an initiative with a strong industrial sense. Banco BPM can move in various ways, thanks to its excellent results. If there are other initiatives from other operators, this is the time to discuss. Orcel’s credit certainly goes to having put further dynamism into the system.
What is the role of foundations today?
The law on banking foundations at the beginning of the nineties was fundamental and has the merit of having triggered the virtuous process in the entire system that I mentioned before. The role of foundations in recent decades has certainly been positive and I confirm this having experienced it from the inside: IntesaSanPaolo would not exist without the active and coherent role of shareholder foundations.
How do you see the future of illimity?
Bank specialized in credit and services to SMEs: with a large potential market available. Bank with very solid capital and liquidity parameters both currently and in the future. A simpler bank to “understand even from the outside” than it has been in the past due to the cessation of investment activity in NPE portfolios and the progressive implementation of planned extraordinary operations. Appointment then for the presentation of the new Business Plan.
And the future of Italy?
What has been said applies to the whole of Europe: a plan of policies and actions is needed to systematically address the three priorities of demography, competitiveness and social hardship. To encourage the growth we so badly need, we must do more to incentivize investment and innovation. In this light, it would be truly appropriate to enhance two regulations – Industry 4.0 and ACE – which have given excellent results and will be able to contribute greatly in the future.
