Bear Stearns Announces Investment Opinion: Bear Stearns Initiates Research Coverage On Italian Banking Sector.

Business Editors

NOTE TO EDITORS: The following is an investment opinion issued

by Bear Stearns 

LONDON--(BUSINESS WIRE)--Feb. 14, 2001

In the currently rudderless equity market, Italian banks hold both upstream promise and downstream risk for investors, according to Bear Stearns analyst Leonardo Rubattu. His new coverage of six Italian banks, released today, can help investors navigate the stormy seas. In a sector overview titled "Value at Risk," Mr. Rubattu suggests value exists in the sector, but cautions that the shorter term may bring increased risk due to what the analyst sees as an inevitable process of consolidation. "Potential buyers in the coming M&A 'lottery,' such as Unicredito, could face major execution risks, while potential targets, including BNL, and groups we believe will not participate in the 'lottery,' such as Fideuram, hold more immediate upside potential for investors," Mr. Rubattu said.

Mr. Rubattu believes the most compelling current stories in the sector are Banca Fideuram (FIBK.MI) and BNL (FIBK.MI), both of which are initiated with buy ratings. While Sanpaolo IMI (SPI.MI) receives an initial attractive rating, Mr. Rubattu has started three banks--Unicredito Italiano (CRDI.MI), Intesa-BCI (BIN.MI) and Banca MPS (BMPS.MI) with neutral ratings.

Some highlights from Mr. Rubattu's reports regarding the companies:

BANCA FIDEURAM

While gathering personal assets in Italy has become a more crowded business, the Bear Stearns analyst believes FIBK's superior customer base, distinguishing and competition-protected value proposition and the sector's most productive salesforce give the group all it needs to be a winner in this business. Mr. Rubattu predicts FIBK's mutual fund-based products will produce 13% compound annual growth rate over the coming decade. He argues the group's shares are undervalued by 45%, based on a fair value of Euro 22.5.

BNL

Mr. Rubattu believes BNL's remarkable turnaround will continue, with return on equity set to find its way back to nearly 12% in 2000, from just 2% in 1998. The Bear Stearns analyst sees BNL approaching the European banking sector RoE average of 18% in the coming three years on the strength of its renewed focus on retail clients, dynamic capital management and streamlining of operations. He also sees the group as a prime takeover candidate capable of demanding a premium from its suitors. Mr. Rubattu has put a Euro 5.1 price target on BNL, representing a 32% upside from current valuation.

SANPAOLO IMI

The analyst believes SPI presents one of the best risk-return profiles in European banking and sees the group heading for a 22.5% RoE by 2003 based on improved retail asset gathering. While some value could be sacrificed if SPI feels compelled to grow through a major acquisition, Mr. Rubattu places the shares' fair value at Euro 22.5, a 20% premium over current valuation.

UNICREDITO ITALIANO

Mr. Rubattu dubs CRDI "our little Citigroup" because of its strategic repositioning as a global financial group; he estimates that 32% of the group's economic capital was allocated outside Italy in 2000. While the analyst likes CRDI's long-term vision, he sees this capital reallocation worsening risk in the nearer term. He places a fair value of Euro 6.36 on the shares, a 13% increase from the current trading level.

INTESA-BCI

Recent restructuring positions BIN to approach its target of 21% average RoE by 2003, but Mr. Rubattu believes the group's ordinary shares are currently trading in line with fair value, at Euro 5.2 per share. A potential upside for BIN could come from what the analyst calls the M&A lottery: he says a merger between UCI and BIN would produce additional value for BIN shares.

BANCA MPS

While BMPS hopes to reward shareholders with average RoE of 26% by 2004 by creating of itself a wholly integrated, multi-specialist, multi-channel-based financial group, Mr. Rubattu believes the world's oldest operating bank will fail to reach that goal. He says the group's rationalisation is not carried out by its strategy of acquiring smaller commercial banks; as a result he believes the group is fairly valued at is current share price of Euro 5.80.

To speak with Mr. Rubattu, members of the press may contact Benjamin Pratt in the Bear Stearns Corporate Communications Department in New York at +1 212.272.9294 or may call him directly at (44) 20 7516 5089.

Bear, Stearns International Limited (BSIL) is a wholly owned subsidiary of The Bear Stearns Companies Inc. BSIL currently employs more than 800 staff in London who serve corporations, institutions, partnerships and governmental entities in the United Kingdom, Europe and the Middle East. BSIL's capabilities include investment banking, institutional equities and fixed income sales, trading and research, derivatives, financial futures, foreign exchange and global clearing.

Any recommendation contained in this report may not be suitable for all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. Bear Stearns may make markets and effect transactions, including transactions contrary to any recommendations herein, or have positions in the securities mentioned herein (or options with respect thereto) and may also have performed investment banking services for the issuers of such securities. In addition, employees of Bear Stearns may have positions and effect transactions in the securities or options of the issuers mentioned herein and may serve as directors of such issuers. Copyright (c) 2001. All rights reserved by Bear, Stearns & Co. Inc.