Analyst Note| Johann Scholtz, CFA |
We assess Mediobanca’s capital allocation as Standard. We believe the decision to shift new investments in wealth management is the correct one. Mediobanca has executed several small, bolt-on acquisitions in this segment. Mediobanca will have to execute well in building out its wealth management presence to deliver the required returns. It is too early for us to judge its success. We are encouraged that Mediobanca is taking an incremental approach and not looking for a large, headline-grabbing, “transformational” acquisition. Large mergers and acquisitions often fail. Mediobanca is also investing to increase its retail deposit funding base. Reducing Mediobanca’s reliance on wholesale funding will ultimately reduce risk and could support higher valuation multiples. We maintain our no economic moat rating and our EUR 10.50/share fair value estimate.