Stuart Mitchell of S. W. Mitchell Capital presented his in-depth thesis on Intesa Sanpaolo (Italy: ISP) at European Investing Summit 2019.

Thesis summary:

Intesa Sanpaolo is by far the largest bank in Italy with an 18% market share in loans and deposits. Just as importantly – perhaps more so – the bank has over 20% market shares in the lucrative asset management, pension funds and factoring markets. The bank has one of the lowest cost income ratios in the industry (52%), ample capital (13.5% CET1). The bank has put in place a highly ambitious cost-cutting programme which should enable the bank to generate a 12% ROE assuming only modest income growth. If we then assume that the restructuring programme is successful, and that the group generates a somewhat higher sustainable RoE of 12%, then the share price should be €3.95, more than double where the shares trade today. If Italian country risk and the cost of equity fell by 2%to 11% we get a share price target of €4.97, 2.6 times higher than today.

Read Stuart’s preview article on European banking.

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About the instructor:

Stuart Mitchell is the Managing Partner and CIO of S. W. Mitchell Capital and the Investment Manager of the SWMC European Fund, as well as a number of managed accounts. Prior to founding SWMC in 2005 Stuart was a Principal, Director and Head of Specialist Equities at JO Hambro Investment Management (JOHIM, now Waverton Investment Management). At JOHIM he set up and managed the Charlemagne Fund, a long/short European fund, and the JOHIM European Fund, a long only European fund. The JOHIM European Fund rose by 133% since inception in December 1998 until March 2005 compared with 8% for the benchmark index and was number 1 rated by Micropal within its sector and three star ranked by S&P. Upon leaving university in 1987 Stuart joined Morgan Grenfell Asset Management (MGAM) and soon afterwards assumed responsibility for managing the continental European equity assets for MGAM’s British pension fund clients. Stuart was appointed a director of MGAM in 1996. He was then made Head of European Equities and was responsible for $27 billion of equity assets. Whilst at MGAM he managed the Morgan Grenfell European Fund which rose by 123% from January 1990 to June 1996 compared with 85% for the benchmark index and was awarded 1st place by Micropal (5 year awards) in 1996. Stuart was born in Scotland and educated at Fettes College and St. Andrews University where he read Medieval History. He is also a graduate of the Owner/President Management programme from the Harvard Business School. Stuart speaks English and French.