Capitalia Chief Executive Matteo Arpe won acclaim and foreign investors with his restructuring of the once underperforming Italian bank. His challenge at a presentation next week is to show how he will produce growth. Arpe, who joined Capitalia in 2001, is due to present his second industrial plan for Italy's fourth largest bank on July 5.
Investors expect high targets from the 40-year-old banking hot shot whose first plan has helped Capitalia's share price quadruple over the past 3-1/2 years.
"Arpe is a charismatic leader, not in the historic Italian mould. He's painfully straight given the temptations in his way," said M&G fund manager and analyst James Alexander, who holds Capitalia stock.
Alexander called Capitalia a "safe" bank, a description few investors believed would ever be applied to the Roman lender that three years ago was riddled with bad loans.
"He's done a good job, but he hasn't finished ... he needs to focus on growth," Alexander said.
Capitalia's 2004 net profit leapt to 337 million euros ($406 million) from 31 million a year before, but revenues grew just 0.8 percent to 4.83 billion in a sluggish Italian economy.
A document obtained by Reuters on Thursday showed one way the former Mediobanca and Lehman Brothers banker may improve his bottom line is by buying out minorities in its merchant bank MCC, valued at 1.5 billion to 1.6 billion euros.
The proposal, which sees the issue of new Capitalia shares, would be discussed by the board on July 4, the document said.
Arpe could also be considering buying out minorities in its asset manager Fineco, where it owns a 46 percent stake, financial newspaper Il Sole 24 Ore said.
Capitalia declined to comment on the reports and said it had not agreed to carry out any extraordinary operations. Investors and analysts said the buyouts would make industrial sense.
"Arpe would gain about 100 million euros a year from cutting out the minorities at Fineco and MCC - and that's a cautious estimate," said one bank analyst with a London brokerage.
Capitalia's market capitalisation is now 10.3 billion euros, up from 2.3 billion euros before Arpe's 2002 business plan.
Adding 100 percent of Fineco and MCC would give it a market capitalisation of around 12 billion euros - an increase some analysts said would help to keep predators from its door.
Capitalia has kept clear of the messy take-over battles engulfing some of its closest Italian peers, Banca Nazionale del Lavoro and Antonveneta, and Arpe has said the bank is focused on organic growth.
But Antonveneta bidder, Dutch bank ABN Amro, holds 9 percent of Capitalia and some analysts have speculated that if its Antonveneta bid fails it may look to Capitalia.
Investors and analysts said Arpe's main focus should be to shake up its retail network, especially its Banca di Roma bank. Italy's retail market is chronically underdeveloped and Capitalia has about 6-6.5 percent of it.
But raising revenues at Banca di Roma and its other retail arms - Bipop-Carire in the north and Banca di Sicilia in the south - will be difficult.
The Italian economy fell into recession in the first quarter and Capitalia's main client base is the central and south of Italy, which is economically weaker than the north.
Analysts said they were likely to be sceptical about Arpe's forecasts and would expect less than was promised.
"We expect the management to present ambitious targets. However, considering the current weak economy we believe the market will take a haircut on these," Mirko Sanna, an analyst with Keefe, Bruyette & Woods wrote in a note.
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