Piazza della Scala, 6

Telephone: (02) 88501

Public Company
Incorporated: 1894
Employees: 21,220
Assets: L81.87 trillion (US$62.67 billion)
Stock Index: Milan Genoa Rome Turin

Company History:

Banca Commerciale Italiana (BCI) is one of the largest banks in Italy. Most of its branches are concentrated near the northern industrial cities of Milan, Turin, and Genoa, but BCI also has a significant foreign presence, with branches or business operations in 45 nations. The bank is basically a short-term credit institution, and it has traditionally specialized in lending to business. BCI is listed on the Italian stock exchanges, but its major shareholder is the Istituto per la Ricostruzione Industriale (IRI), a state holding company, which owns 59% of the bank (it also controls two other major banks, Credito Italiano and Banco di Roma).

BCI's predecessor, Societ&agave; Generale di Credito Mobiliare, was founded in 1862. In the newly unified Italy, this institution soon became successful as a lender to the iron and steel industry. During the Italian banking crisis of 1893-1894, however, Credito Mobiliare went under. On October 10, 1894 Credito Mobiliare was re-established as a private joint-stock bank under the name Banca Commerciale Italiana with capital from several German and Austrian banks, including Bleichröder, Deutsche Bank, and Dresdner Bank. BCI was originally modeled along the lines of German banks, making both short- and long-term loans. The young BCI continued to specialize in loans to industry, especially to companies in shipping, textiles, and electricity.

Italy suffered another depression in 1906-1907. During this crisis, the iron and steel obligations that BCI had assumed from Credito Mobiliare put the bank in a dire financial situation. In order to prevent disaster, the Bank of Italy formed a consortium of banks to lend aid to the steel and iron industry.

Prosperity soon returned. In 1911 BCI opened its first foreign branch, in London. The bank's expansion continued until 1913, when inflation finally caused business to slow.

World War I helped many companies to grow rapidly, but by 1918 overexpansion of the war industries had left several large firms failing and weighed heavily on the banks that had made loans to them. In response to this situation, BCI, Credito Italiano, Banco di Roma, and Banca Italiana di Sconto formed a cartel to coordinate the granting of capital to industry, an action that was widely criticized. Observers saw the leaders of big industry and the big banks becoming too intimate and using their collective power to sway the whole financial system.

One of the companies BCI was heavily involved with was Ansaldo, the large steel concern. At one point Ansaldo's management tried to buy up BCI's shares to gain control of the bank and save themselves from bankruptcy, but ultimately they failed to do so.

In 1918 BCI opened its second foreign branch, in New York. Growth was slow but steady during the 1920s until the stock market crash of 1929.

By 1933, BCI, like many Italian banks, was in deep trouble. That year, the government created Istituto per la Ricostruzione (IRI), a public agency, to reorganize not only the banks but also several industries. IRI became the owner of the previously private BCI, as well of Credito Italiano and Banco di Roma. It also acquired the banks' industrial holdings, thus removing them from direct involvement in these companies.

Although IRI was created as a temporary measure and had sold most of its assets by 1936 to private investors, as it had intended, the agency still retained ownership of the banks. In 1936 BCI became primarily a short-term lender when a law was passed that drew a strict line between banks that issued short-term loans and those that issued medium- and long-term loans, in an effort to mitigate some of the worst effects of mixed banking.

In 1937 BCI, Credito Italiano, and Banco di Roma were declared "banks of national interest," a designation that was applied only to banks with branches in at least 30 provinces.

During World War II much of Italian industry and agriculture was destroyed. In the years following the war, the Allied Control Commission took control of IRI and investigated its companies for wartime criminal acts, but they were eventually cleared of any blame. Once again, the plan to break IRI up and sell its parts to private investors was put off, as Italy's capital markets were still too weak.

In 1946, BCI, Credito Italiano, and Banco di Roma founded Mediobanca, a medium-term credit institution that today is a powerful force in the banking industry.

After the war, Italy managed a remarkable economic recovery as it re-entered world markets. BCI became especially active in financing imports and exports. The bank expanded its domestic business to include loans to agriculture and retained its position as the leading domestic lender. BCI also created subsidiaries for mortgage financing, leasing, and factoring.

Italy's stable and long-term growth during the 1950s and 1960s was mainly due to the growth of exports. Banking activity improved, particularly in terms of domestic bank networks, but Italy's internal economic recovery did not push banks toward international expansion. Consequently, the opening of foreign branches slowed.

BCI and the other banks of national interest were chronically lacking in capital. To remedy this, the banks were first allowed to sell shares to the public in 1969, but IRI retained the vast majority of shares. During the 1980s, IRI's ownership of BCI decreased by stages to its current 59%.

In the early 1970s, the oil crisis hurt the Italian economy, especially in the South, and the chemical and metal industries required a great deal of emergency aid from the government through the state-controlled banks. As a result, these banks found their resources concentrated in only a few enterprises.

In 1972, despite the low demand for credit and an overall rise in bank costs, with shrewd management, BCI's net profits rose substantially. But while deposits rose 19%, lending increased only 16%, an indication of the overliquidity in the banking system at that time.

Between 1973 and 1983, the Bank of Italy regulated the money supply through the institution of strict credit ceilings, which fostered competition among the banks but hampered their opportunities for growth. By the end of the 1970s, the Bank of Italy was also restricting international expansion because banks were opening subsidiaries and branches abroad and using them to get around domestic restrictions.

In July, 1981 the Bank of Italy issued guidelines for commercial banks like BCI that curbed freedom in nonbanking areas and tightened control of international ventures. At the same time, it eliminated many of the differences in the regulation of state and private banks.

In June, 1982 BCI's proposed acquisition of Litco Bancorporation, the holding company of Long Island Trust Company in New York, was approved by the United States Federal Reserve Board. By then, BCI was the second-largest commercial bank in Italy, and had branches in New York, Chicago, and Los Angeles. BCI paid $93 million for Litco and agreed to invest $20 million in the company within six months. In accordance with U.S. banking law, BCI also agreed to sell some of its interest in Lehman Brothers Kuhn Loeb Inc., an investment-banking and brokerage firm.

In 1983 the Bank of Italy lifted credit ceilings, prompting increased competition among the banks, and forcing the banks of national interest to re-examine themselves. The system was badly in need of restructuring. It was overstaffed and underproductive, in part because in Italy it was difficult to fire workers in bureaucratic posts. As a result, Italy's banks had very high operational costs by European standards; in its fragmented system of 1,200 banks, it could take up to a month for a check to clear. In addition, Italy's conservative restrictions were preventing Italian banks from achieving modernization at the level of other European banks.

In 1983, BCI and Assicurazioni Generali SpA, a large Italian insurance company, together formed GenerComit Gestione SpA, an investment management company. That year, BCI also established BCI (Suisse) and sold 35% of its interest in the Swiss Banca della Svizzera Italiano.

Throughout the 1980s, BCI continued to be active in financing imports and exports; in 1986, it accounted for 12.3% of the nation's import-export financing. But from January to June, 1986, the Bank of Italy reimposed credit ceilings on banks in an effort to control inflation. Consequently, lending slowed significantly during those six months. In December, the Bank of Italy announced its approvals for new branches, but gave the banks of national interest permission to expand only 3%, much less than had been expected.

In 1987, BCI was the largest Italian bank in terms of lending. That year the bank sold North American Bancorp (formerly Litco Bancorporation) to the Bank of New York. The bank also acquired Finservizi SpA and merged it into the company, taking advantage of the tax deductions attached to its outstanding losses. And that same year BCI created Fin. Comit SpA, a financial-services subsidiary, and opened offices in Munich and Shanghai.

In 1988, BCI transformed its Frankfurt office into a full branch, opened an office in Bombay, and added a representative office to its Tokyo branch. The bank also founded the BCI Funding Corporation in Delaware. Although BCI had traditionally held more deposits from companies than households, it began to extend into smaller commercial centers that year to acquire more business from household accounts. BCI established Banca Internazionale Lombarda with the help of Banque Paribas, a French bank, and the Italian insurance company Assicurazioni Generali in order to devise more innovative financial services in Italy and overseas. BCI also planned to reorganize all of its nonbanking activities under one holding company.

In April, 1988, in an effort to strengthen its American business, BCI made a $755 million bid for 51% of the Irving Bank Corporation in New York while Irving was fending off a hostile takeover bid from the Bank of New York. BCI was forced to drop its bid in August, however, because of requirements the United States Federal Reserve Board.

The Bank of Italy began to take measures in 1988 to reform its banking system before the unification of the European market in 1992. Credit controls were abolished and currency exchange controls were to be phased out. In line with this, BCI planned to double its 450 branches by 1991 by pushing into towns where it has been under-represented. In addition, in late 1989 BCI acquired a 2% stake in Compagnie Financiere de Paribas, the French banking group.

Throughout its history, BCI has played an important role in Italian banking, but the future shape of the industry is somewhat uncertain. As Italian banks vie for a place in the unified European market, it is possible that BCI will become entirely publicly owned, or even merge with another institution. In any case, it has a solid chance at securing a leading position, especially in light of its already existing international connections.

Principal Subsidiaries: Banca di Legnano S.p.A. (53.05%); Banco di Chiavari e della Riviera Ligure S.p.A. (69.62%); Comit Factoring S.p.A.; Comit Leasing S.p.A.; Fin. Comit S.p.A.; Immobiliare Besana S.p.A. (98.43%); Banca Commerciale Italiana of Canada ; Banca Commerciale Italiana (Suisse); BCI Limited (70%); BCI Nominees Limited; Societe Europeenne de Banque S.A. (55%); La Gardanella S.r.1.; S.I.R.E.F Societa Italiana di Revisione e Fiduciaria S.p.A.(60%); SATA Sociedade de Assessoria Tecnica e Administrativa S.A.; Servita S.A.; GenerComit Distribuzione S.p.A. (50%); GenerComit Gestione S.p.A. (50%); I.L.S.A. Idroelettrica Ligure S.r.1. (80%); Societa Trezza S.p.A. (76.65%); North American Bancorp, Inc. (74%); Comit Finance (Jersey).

Source: International Directory of Company Histories, Vol. 2. St. James Press, 1990.