Banks and renaissance

Insurance Daily | January 2021

Banks are currently witnessing the biggest revolution since the postwar period. The entire banking system is undergoing a process of redefinition. The process of aggregation of banking groups will culminate in 2021, lasting at least until 2025. 

In this context, a new wave of NPLs rests on the banks’ shoulders. Its reach will be quantifiable only after the due date of moratoria. 

Three challenges lie ahead of banks.

The first consists in the optimization of the service model, which depends on a higher level of proactivity and appeal of investment proposals. The aim is to intercept and convert in assets under management 1.700 billion euros on bank accounts. 

This job requires competent and proactive professionals capable of widening the time horizon of Italian investors; today, Italian investors have a two-year time horizon, as compared to a European average of 3,5. 

Financial professionals should work like botanists do: planting a bulb is not enough to see a flower grow; it is necessary to look after it and protect it from casualties until it eventually sprouts. 

In the next five years, bank branches will be reduced of at least one third. They are going to be guarded by the best bank employees, who will focus on the wealthiest and most demanding clients.

The young and the base client segments will mainly make use of the bank’s digital platform, where they will be able to invest thanks to robo advisory systems based on the model of Charles Schwab.

ETFs are going to get increasingly numerous, leaving space only for the best products in active investments. 

The second challenge consists in giving an effective contribution to the Country during the phase of economic reconstruction. 

Only through profitable budgets and stocks deriving mostly from wealth management and financial consultancy divisions will the best Italian banks be able to help companies and families.

The heart of the matter is changing 1.700 billion euros on bank accounts in assets under management directed towards real economy.

“Investment choices are not a private affair anymore. They now have a ‘collective’ impact and investors have an important responsibility as they make their choices. Therefore, today more than ever before, it is possible to create at once social and economic value provided that the resources are directed towards companies whose business model is valuable for the entire society” (Luciano Balbo and Lorenzo Allevi, Oltre Venture).

“Our Group’s strong financial stability has allowed the Bank to promote several initiatives in favour of private citizens and companies” 4 February 2020, Carlo Messina, CEO of Intesa Sanpaolo.

The third challenge consists in protecting companies and families. In this context, insurance companies and bancassurance arrangements have a very important role. 

The new process of rationalization of the arrangements between insurance companies and banks will result in the higher level of concentration of the players on both sides.  

It is possible to imagine that by 2025 our Country will count five or six bank groups and just as many insurance companies that will control 80% of the market. The remaining 20% will be prerogative of banks and insurance companies specialized on specific client segments or services. 

The theme of protection is key to companies and to the economic recovery in terms of management continuity. In 95% of Italian companies with ten employees the figure of the entrepreneur is central and often irreplaceable. 

The potential of key man insurance policies is only an example among many of the several opportunities banks and insurance companies cannot miss. 

We expect that, together with banks and insurance companies, financial networks and insurance brokers will play a key role in this new scenario. 

In both cases, we are in front of fields populated by financial professionals with great expertise and entrepreneurial spirit, both necessary qualities for revamping our Country. 

Nicola Ronchetti