Face to Face with Alan Friedman - Giuseppe Castagna (CEO of Banco BPM)

Giuseppe Castagna, CEO of Banco BPM, welcome to this face-to-face with Fonti TV. Good morning, thank you.

So, let's talk about the world economy at a time of slowdown globally. America and China, tariff wars, problems in general. How do you see it?

So let's talk about the ECB. Mario Draghi will leave until October. Draghi, what is your overall judgment on Mario Draghi?

Brutally, Mario Draghi said 'when you are in a dark room, you have to take small steps.' So at three... English and French in Italian is cautious. He signaled, assigned, indicated with a fire the games that there already interest will remain as only for all of 2009 and that he will use this year the... Comments on these two indeed but...

But the real point is that by announcing almost initiatives, Draghi has more or less put a bit like the Fed chairman the other day when he also said 'we don't raise'... the same America that the slowdown you understand everyone and that in Europe we have seen the figures: Germany, can follow of GDP growth, Italy 0. This less, how do you see it this year for the macro European economy? Not exactly, Europe is the real sick man of the global economy, in the sense that we have had the symptoms for some years.

So, Castagna, do you agree with whoever said the other day at Palazzo... like Mauro? ... an error or was it necessary? How do you see it?

Let's get to the situation in Italy. In recent days, a member of the supervisory board of the European Central Bank, who by the way spoke in Italian, talked about a recession whose causes are self-inflicted aspects. Self-inflicted. So, what did he say? Do you agree with this analysis?

But I the other day had... the redemption and turn? Botti, governor of the Bank of Italy, as well as member of the governing council of the ECB, and he was much more explicit. He said: 'For me, undo the Fornero pension reform, undo the Jobs Act, undo...' he transcribed it putting this dignity decree that made the renewal for fixed-term less flexible. These reforms harm the Italian economy. Would you agree with this judgment?

But since two minutes ago you said that austerity was excessive in the last 5-10 years, let's say: the pension reform and the Jobs Act, were they right moves or wrong? Were they not right moves?

But since we are in a recession at this moment in Italy, since two of the policies of the new government are quite discussed at European level, let's talk about it. The citizenship income is a measure that in your opinion can create new jobs or is it more a mixture of social assistance for the poor on one hand, plus subsidies and dissipation added in a confusing way? My words.

But it is presented by... lido? Some politicians in Italy as a deliberate redistribution of wealth, they talk like that. Let's leave that aside. The real point is not what politicians call it, but the effect on the macroeconomy and consumption, which are weak in Italy. In your opinion, if to help the poor there had been a doubling or tripling of the inclusion income, really those below the poverty threshold, and they went to continue the policy of tax relief for new hires for women, young people, soldiers, would that be a more effective policy?

Ok. Questions in the weak? What would be the solution to create more internal demand in this economy of recession? Sure, but also the theme of stimulating consumption. But as I said before, a situation of greater stability and confidence would be indispensable.

But in the end, the heaviest problem for Italy is public debt, or not? No, I think it is a problem both from a formal point of view of appearance. Objectively, Italy has shown it is able to manage a large public debt, helped by the monetary policies of the ECB, we talked about Draghi earlier, because we have had low rates and a high debt, the savings of Italians help us a lot, which is the real asset we have in this country. However, it is evident that it must be redesigned for convergence, that is, if you have adhered to a European pact, it was a stability pact, you have to respect it in some way. I am also convinced, I say it also from the experience in our company, that the important thing is to give signals of improvement. It's not that you have to go from 130 to 100 by going on a diet that makes you enemies of everyone, but the trend and the seriousness of the trend. So giving signals of voluntary improvement, also negotiating what may be measures that you might not normally be able to do but that you consider politically valid, but they must be accompanied by a tendency of good will and seriousness in implementing reforms already in place. And this is a noble wish, but here on planet Earth, in everyday reality...

The European Central Bank, the IMF, the OECD, the European Commission, the Parliamentary Budget Office, economists around the world, even the chief economist of Banco BPM, say and write that this year with the policy that is not accidental, it is likely that public debt will increase, will be larger at the end of the year, growth will be between 0 and negative, and therefore the deficit will be sky-high.

I don't understand how confidence can be generated in a climate where the designs go in the opposite direction.

But if someone like... cultural decline says there is a bit of this problem, their concession of lack of confidence in Italy that comes from the slowdown and national, there is a bit that comes from instead a self-inflicted problem. How do you see it? A bit, a bit no? I see that when we measure ourselves on equal terms with all other economies, Italy has always done much better, has always shown it can do it. It is clear that if there is a slowdown situation, you also have some self-infliction, it becomes more fiction.

Do we have to wait for further consolidation? This bank is the symbol of consolidation. How many banks did you put together? Well, through various acquisitions, more than ten banks. Ten banks. And so you are the number... that is, now on the market, what is it? 2000 branches? 1800? We started with 2500, now we have arrived at 1800. We have already closed 700 in two years, because this is the other problem: the physical network to be addressed for the banking system. 22,000 employees, 4 million customers. In short, we are a bank that must clearly set itself objectives and ambitions that are more national in character than local, as it was until a few years ago.

But in your opinion, the sword of Damocles over Italian banks of non-performing loans, is it now less threatening? Is it still a problem to be solved for the system? I don't name them. I think that at this moment it is clearly no longer a problem. It could become a problem again if the recession were to start hitting the country again and we were to have other years of difficulty, but I repeat, the starting conditions compared to ten years ago are very different. However, I don't want to evade the question on consolidation that you had prepared.

Let's address what perhaps people are more eager to understand: banks are criticized, all banks, often every day on Italian television. The main criticism is that banks don't do enough for small businesses. How do you comment on this? Meanwhile, we are the bank of small and medium enterprises, so we are particularly pleased that there is attention to this topic. After that, in general, I must say that probably the entire banking system would not have ended up with hundreds of billions of non-performing loans if we had not also in the past had an attention, perhaps instead exasperated, to support SMEs, which on the other hand are the economic fabric of the country. You cannot do banking in Italy if you don't do banking with SMEs. 90% of 90% of our loans in terms of number of heads are to small and medium-sized companies.

Let's say that for this reason, it should be said to the shareholders. I am happy that banks did well. Vision of banks: they also do a bit of charity with foundations and other instruments, but in their activity, look, calculations that in our country it is considered objectively today the one with more problems from an economic point of view compared to other European countries. The rates applied to companies in Italy are lower than those applied in Germany, which is a rich country with companies on average healthier, with less recourse to debt. This must mean something. In my opinion, the answer is that we are too many banks that compete fiercely, often on clients who may have less good creditworthiness.

But speaking of this bank, Banco BPM, what could it do or what do you want to do to help support the economy of families and businesses?

We are almost done. What do you think of cryptocurrencies and blockchain? Maybe... Well, first of all, I think they are two quite different things. Not being the first, not being an expert, Prague? Renzi? It scares me. I am quite reluctant to address the topic because we have had many experiences of this kind in the past, and I don't think... we have done a lot to arrive at a single currency in Europe, and we have many around the world. Perhaps we have less need for a new one, especially if not regulated, as was the risk in the months when these things had a lot of emphasis. As for blockchain, I consider it from a point of view, let's say, you keep it, information technology, and objectively having a possibility to trace, for example for banks, the entire payment system and the path that the various phases of payments take, is a technology that is objectively useful and important. I think it will establish itself. But this bank, for example, has some experiments, payment systems of Brussels? But we clearly, for the whole world payment system, like all banking systems, rely heavily on external entities in which we also have equity stakes, as in this case Nexi, which in turn take care of the interbank payment world. So clearly we develop through these very important product companies, which are talked about a lot today because they are potentially both going public. As for our internal activity, let's say related to the fintech world, we look with great attention in some sectors, especially in a sector that then addresses small and medium industries, all those innovative developments that are difficult to create inside the bank and that are often proposed to us to make partnerships or common commercial offers or even to enter into companies.

Last question, because it is current in this period. Is it right to be part of a European infrastructure network of high-speed trains that connects the rest of Europe? It will find, underlines Leo, I need it. Stop to the project? According to the precise... I ask it as a rhetorical question, not only is it right, given that a few days ago I saw a map showing the intermodal network of high-speed rail in Europe, the only fracture that exists is that between Turin and Lyon. In an interconnected world, in a united Europe, it makes no sense not to be part of it, with the logistical capabilities that our coasts give us. These days we also talk a lot about this famous discourse of ports open to China rather than the rest of the world. You saw that it raises. Is it right that Italy is the first G7 country to be part of the policy? But forgive the voices, there are many, objectively many agreements that must be respected. We must remember to be part of important alliances that have kept Europe and the rest of the world at peace for many years. However, objectively, all countries in the world make bilateral agreements, as long as they do not violate those that are strong pacts that underpin other agreements. In my opinion, it is right to encourage this development also in this specific topic, which I do not know in detail, but I believe that having made a form of collaboration with such an important player as China cannot be considered a wrong move.

Giuseppe Castagna, thank you for your time. Thank you very much.