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Project Bank: 'No deposit flight'

The bank's growth supported by (significant) as well as parallel growth in customer deposits. The crux of the transfer of control from Oaktree to Centerbridge

by Luca Davi

25 October 2024

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L'ad di Banca Progetto, Paolo Fiorentino, nella conferenza stampa convocata sull'onda dell'inchiesta che ha travolto la banca

4' min read

Key points

The scenario
The transfer junction
Retail and collection

4' min read

"The bank is not commissioned: the board, the CEO and all the managerial structures within the bank are fully operational". The ceo of Banca Progetto, Paolo Fiorentino, convenes an urgent press conference to "stem" the flow of "erroneous" news, as he defines them, bouncing around the web and risking to "damage the reputation" of the bank, after the accusations of financing to companies linked to the ndrangheta. "Neither the bank, nor its members and employees, are under investigation," says Fiorentino. Who emphasises that "in the context of a criminal proceeding that does not concern" the institution, the measure relates to "investigative deficiencies of 10 loans out of about 40,000 outstanding".

Fiorentino said he was 'astonished' at the decision to place the bank under judicial administration: an institution never used in Italy for a bank, which envisages placing the institution under guardianship on the credit front through the appointment of a trusted figure from the Public Prosecutor's Office (Donato Maria Pezzuto), who will be in charge of monitoring the relative processes and control measures, attending board meetings, and then reporting to the judges on the state of the art. What the outcome of this verification will be will be known on 25 February, when the court will decide whether to extend (or not) the measure. 'It is a measure that I do not like but that I will have to respect,' says the manager.

But Fiorentino is also keen to emphasise that he has done everything possible in terms of controls. 'We are unpleasantly involved, but we are not a police office nor the Finanza,' says Fiorentino. 'We do all the possible checks of the databases and the names referred to in the document of the Milan Public Prosecutor's Office are not our clients. They are not in our registry' and with respect to the ten or so files under investigation by the prosecutors, 'none of the subjects mentioned referred to one of these companies'.

The scenario

It will take time to understand whether Banca Progetto has been entangled in an 'accident of the road', as the Neapolitan banker calls it. Or whether instead the investigations of the Public Prosecutor's Office - with which the Bank of Italy is in contact and carrying out the appropriate in-depth investigations - will give way to further developments. Certainly the news comes as a boulder to slow down the swirling growth of an institution that in the space of a few years has conquered an important space in the SME credit market.

The bank controlled by the US fund Oaktree closed 2023 with a net profit of EUR 72 million, up 38.3% from EUR 52 million at the end of 2022, and saw a steady increase in loans to SMEs, particularly during Covid, a period during which the group strongly leveraged guarantees from Mcc and Sace.

The hinge of divestment

Today, the bank finds itself having to deal with a serious reputational crisis, the effects of which may have heavy impacts on two fronts in the first place. The first concerns the junction relating to the sale of the bank. In September, the Californian private equity fund Oaktree - the bank's sole shareholder with 99.8% - sold its entire controlling stake in the former Popolare Lecchese to the American fund Centerbridge, which saw growth potential in the institution led by Fiorentino. The transfer of ownership is now being examined by the Supervisory Authority, but it is clear that the judicial news is now an unknown factor, the effects of which have yet to be measured. 'I can't imagine,' Fiorentino explains, 'these are processes that concern the two shareholders: in the coming days we will provide a report on the matter and we will understand whether (the judicial measure, ed.) has an impact or not, certainly the machine was already set in motion and we will provide all the elements so that the process does not stop'.

Retail and collection

The other profile of utmost attention, however, concerns deposits, particularly retail. Because it is a fact that Banca Progetto's growth has been supported by (significant) as well as parallel growth in customer deposits, largely driven by deposits (both in Italy and abroad) fed through the web and digital platforms. Highly remunerated deposit accounts have attracted thousands of savers. What consequences will the judicial earthquake and the inevitable media repercussions have on depositors now? The topic is a relevant one, particularly after the Silicon Valley Bank case, a US institution that ended up in default in March 2023 due to a 'bank run' fuelled by word of mouth on the web and social networks. "At the moment we have not had any repercussions" on deposits and "we are reassuring our customers, who have a protected profile: the average of our accounts is EUR 30,000. We currently have no significant outflows'. But the issue, Fiorentino admits, is 'a point of attention'.