Financial crisis? What banking crisis? Such astonished exclamations can currently be heard in a country from which one does not expect it at first glance: Italy. This is mainly due to one bank, the second largest in the country – Unicredi t, which also includes HypoVereinsbank. No stock in Italy has increased in value more this year. The increase since the beginning of the year is a whopping 44 percent. In a twelve-month comparison, the increase is more than 84 percent and within three years 184 percent. Even a Ferrari can't keep up. Since the beginning of the year, the shares of the Italian luxury manufacturer have only been the second-best performer, ahead of the arms company Leonardo.

Christian Schubert

Economic correspondent for Italy and Greece.

  • Follow I follow

Unicredit's chief executive, Italian Andrea Orcel, who took over in 2022, has taken over the bank after his French predecessor Jean Pierre Mustier completed much of the restructuring work. But Orcel once again puts his own stamp on it, refrains from costly acquisitions and makes the business more streamlined. In doing so, he manages the twenty or so markets in which his bank is active in a mixture of a long leash and precise remote control. And he distributes many billions from the whopping profits to the owners or buys back shares. One by one, the brokerage houses have raised their recommendations. Berenberg Bank, for example, sees a potential for the share, which is listed at around 19 euros, up to 25 euros. UBS even believes in 31.50 euros.

In general, the Italian stock index FTSE-MIB is impressive this year. After falling by around 13 percent last year, it has gained a good 16 percent since the beginning of January, significantly better than the S&P 500 index. Banks and energy companies have traditionally had a strong weight in the Italian index. In addition to Unicredit, the energy companies Enel, A2A and Saipem are providing a boost. At the same time, the shares from Italy benefit from a comparatively cheap valuation: According to Morgan Stanley, the ratio between the price and the profits predicted for 2023 in Milan for the FTSE-MIB index is only 8.9 on average. In contrast, the Dax has 11.4 and the Eurostoxx-50 12.3. The American indices are once again significantly higher valued.

In line with this, the outlook for growth in the Italian economy is brightening somewhat. The EU Commission now expects gross domestic product to grow by 1.2 percent, after predicting 0.8 percent in winter. This would mean that Italy's growth this year would be just above the EU average. After the surge of 3.7 percent in the previous year, a contraction to only about one third seems unavoidable. But the recession that was feared some time ago has been averted. Since the slump caused by the pandemic, the Italian economy has grown again by 12 percent, if the forecast for 2023 is correct, Italian EU Commissioner Paolo Gentiloni stressed, adding that, unlike Italy, Germany and France are unlikely to achieve 1.2 percent growth this year, but less.

However, the extensive aid programme of the European recovery plan is a cause for concern. Italy is struggling to spend the roughly €190 billion it is entitled to by 2026. Since the second half of 2022, there have been delays, also due to increased inflation. The government is working on a revision of the list for the various infrastructure projects, but this is dragging on. A number of medium-sized companies can also benefit from the flood of money if the cumbersome Italian state administration gets going. This is pointed out by the investment bank Mediobanca from Milan. She currently sees the construction group Webuild and the railway track designer Salcef as one of the winners of the financial injection from Brussels, because the railway sector has done the most so far.

On the other hand, the "digital helpers" referred to by Mediobanca, which cover the digitization focus of the European recovery plan, have received fewer concrete orders. The investment bank includes the companies Reply, Sesa, Tinexta, Digital Value and Alkemy. More recently, therefore, Italy's medium-sized companies have also performed worse than large ones on the stock market.