Banca Nazionale del Lavoro SpA

1998–2005

Total Assets: EUR 78.89 billion ($101 billion) (2004)

Stock Exchanges: Milan

Ticker Symbol: BNL

NAIC: 522110 Commercial Banking

Banca Nazionale del Lavoro SpA (BNL) is Italy's fifth-largest bank and one of the top 100 banks in the world with total assets of nearly EUR 80 billion ($110 billion). Formerly controlled by the Italian government, BNL is also Italy's most national bank, operating more than 700 branch offices in every region and every major provincial city in Italy. BNL offers services in commercial banking; capital market and treasury operations; asset management, through subsidiary BNL Gestioni; and credit and debit cards; as well as insurance (BNL Vita), leasing (Locafit SpA), and factoring (Ifitalia SpA). Privatized in 1998, BNL failed to complete a merger with Banca Monte dei Paschi di Siena that would have placed it at the top of Italy's banking industry. Instead, BNL has since become tabbed as a prime takeover target by foreign banks seeking entry into the Italian market. In April 2005, major shareholder Banco Bilbao Vizcaya Argentaria (BBVA) of Spain launched an effort to take full control of BNL. A merger of BNL into BBVA would then create one of Europe's first and largest cross-border banking groups, leading the way to a truly European banking market. In June 2005, however, the BBVA bid was challenged by rumors of an impending bid by Italy's Unipol Compagnia Assicuratice SpA, possibly with the backing of Deutsche Bank. BNL is listed on the Milan Stock Exchange and is led by president Luigi Abete.

Becoming a National Bank in the 1920s

Banca Nazionale del Lavoro can trace its origins to the Italian banking cooperative movement. Italian banking cooperatives, stimulated by the economic ideas of Luigi Luzzatti, among others, had begun to grow strongly amid the economic and trade reforms instituted in the early years of Italian democracy. Until then, the country's banking sector had been largely dominated by banking foundations controlled by religious entities, such as the Banca Monte dei Paschi di Siena.

In 1936, the Italian government enacted a new Banking Law that placed the country's 24 largest banks under direct government control.

1913–1936

In order to provide a solid foundation for the growth of Italy's new banking cooperatives and for the cooperative movement in general, Luzzatti and others called for the creation of a central organization as a coordinator of funding and loans to the cooperatives, using funds and loans from the Italian government and other sources. That body was created in 1913 under the auspices of Giovanni Giolitti as Istituto Nazionale di Credito per la Cooperazione (INCC). Arturo Osio became the INCC's first director. From the start, the INCC's focus was the national market, a feature that set it apart from the country's largely locally and at best regionally focused banks.

By the 1920s, the INCC's future was threatened by the rise of the fascists to political power. As fascist groups raided and plundered the country's workers associations and cooperatives, which were associated with communist and socialist parties, the INCC's base shrunk dramatically. The bank was finally rescued by the Italian government, which recognized the need for a bank operating on a national scale.

Toward the end of the decade, the Italian government decided to take over the INCC, still under Osio's direction, and convert it to a state-owned, publicly operating company. The banks range of operations were also expanded, adding commercial banking functions. In 1929, the INCC was formally converted to the status of a commercial bank. At that time, the bank took on its new name, Banca Nazionale del Lavoro.

Italy's banking sector plunged deeper into crisis during the 1930s and by mid-decade bordered on complete collapse. In 1936, the Italian government enacted a new Banking Law that placed the country's 24 largest banks under direct government control. Among other features, the banking reform established a separation between short-term lending on the one hand, and medium- and long-term lending on the other. The reforms also placed BNL in the privileged position of using special credit instruments, such as government-subsidized loans. In this way, BNL was able to capture a growing share of the market, and by the end of the decade represented some 5 percent of Italy's total banking market.

During this time, BNL restructured its operations, creating a number of new, more or less autonomous divisions focused on specialty operations. In this way, the bank was able to respond more directly to the market. The restructuring into business units helped pioneer the emergence of modern banking structures in the Italian banking industry overall.

Repositioning: Postwar Era through the 1990s

The Italian capitulation to the Allied forces during World War II put BNL's operations on temporary hold. In the 1950s, however, BNL came to play an important role in the reconstruction of the country. During this period, BNL was given "special banking" status which enabled it expand its operations beyond its traditional support of the country's cooperative movement. As such, BNL was permitted to begin lending to the country's small and mid-sized business sector, as well as to the public utilities sector. Among BNL's favorite lending targets were the country's film and tourist industries, both of which enjoyed massive international success in the 1950s and 1960s. Another initiative of the bank was its "Green Plan," which provided funding to the agricultural sector in the 1950s.

1982–1994

BNL's growth remained steady through the 1960s. The bank played a leading role in supporting Italy's economic boom, particularly by supporting the growth of many of the country's private and publicly owned companies. By the end of the decade, BNL counted among Italy's top banks, and had also established a position for itself among the larger European banks.

In the 1970s, however, new banking reforms, including the introduction of a single treasury department in the Italian government, placed BNL under pressure. As the new treasury took over much of BNL's former core operations of lending to government agencies and government-owned companies, BNL was forced to look elsewhere to maintain its growth.

BNL then began the slow process of repositioning itself away from its legacy as a provider of funding and loan support to Italy's cooperatives and businesses. Through the 1970s and 1980s, BNL began building up new operations in the retail banking sector, before emerging as a full-fledged commercial bank in the 1990s. As part of the group's repositioning, it established an extensive network of branch offices in Italy. By the early 2000s, BNL boasted the country's most national network, with more than 700 branches covering every region and major provincial city in the country. BNL also expanded internationally during this time, notably in the Latin American countries of Brazil and Argentina.

Takeover Target in the 2000s

During the 1980s, BNL became embroiled in a series of scandals, including what some consider the greatest banking scandal of all time. BNL's problems began when it became involved in a scheme with Banco Ambrosiano, soon to collapse in 1982, to fund the secretive right-wing group Propaganda Due, linked to terrorist attacks in the 1970s.

The late 1980s then saw BNL make international headlines when it was revealed that its branch office in Atlanta, Georgia, had secretly funneled some $3 billion in loans to Iraq. The extent of the scandal was so great that it was listed in the Guinness Book of World Records. As a result, BNL was forced to shut down its Atlanta office in 1994 and generally cut back its U.S. operations.

By then, BNL had begun to move toward its privatization. In 1992, the Italian government, amid a new restructuring of the country's banking sector, converted BNL into a private corporation. The bank nonetheless remained controlled by the Italian government at more than 80 percent. Leading the newly privatized, and money-losing, bank was Mario Sarcinelli, who, as a general deputy in the late 1970s, had been among those who had initiated the investigation into the Propaganda Due scandal.

1998–2005

BNL's privatization itself was carried out in 1998, when the government floated the bank on the Milan Stock Exchange. The offering was highly successful and gave the bank such major shareholders as Instituto Nazionale delle Assicurazioni (INA), Banca Popolare, and, in 1999, Assicurazioni Generali, which acquired INA's stake. Another major early investor in BNL was Spain's Banco Bilbao Vizcaya Argentaria (BBVA). That bank made no secret of its ambitions to become a leader in what many observers saw as an impending wave of cross-border mergers as part of a process of creating a truly European banking industry.

In the run-up to this larger European consolidation, many of Italy's largest banks launched into a series of mergers, creating a new set of market leaders. BNL, too, sought out a partner for a merger that would enable it to maintain its status among the sector's leaders. In the early 2000s, BNL appeared certain to merge with Banca Monte dei Paschi di Siena. Yet by 2002, after the two sides were unable to reach an agreement on terms of the merger, the marriage was called off.

Instead, BBVA stepped up to announce its interest in acquiring full control of BNL. By April 2005, BBVA had tabled its offer, in a bid worth more than EUR 9 billion. Yet the offer soon appeared to have hit a roadblock when a group of BNL shareholders, the so-called "counter-pact" led by businessman Vito Bonsignore, declared its refusal to sell its 25 percent stake in BNL to BBVA.

As the two sides searched for a compromise in order to resolve the situation, a new suitor for BNL appeared. In June 2005, industry rumors had begun to circulate that Italy's Unipol Compagnia Assicuratice SpA, possibly with the backing of Deutsche Bank, was preparing a bid for NBL. Both sides denied the rumor, however.

While waiting for the outcome of questions surrounding its future owners, BNL launched a streamlining effort in an attempt to stop its losses, which topped EUR 34 million in 2004. As part of that effort, the company exited its Latin American markets, selling off its businesses in Brazil and Argentina. BNL's focus on its domestic market made it an attractive target for foreign banks seeking entry into Italy in the mid-2000s.