consolidated annual report - Gruppo Banca Sella

2005 OUTLOOK
ECONOMIC BACKGROUND
The macroeconomic background acting as frame of
reference to the forecasted development of the Group in
2005 is based on the following assumptions:
• the growing globalization led to a change in international
geopolitical and economic balances, leading to
an increased importance of emerging economies on
the international scenario. In particular, Chinese and
Indian economies are living through high rates of
growth. USA demand has confirmed its importance
for the growth of emerging economies: any remarkable
slow down of the growth of the USA economy
will have inevitabile negative repercussions on the international
development. It is however deemed not
likely that the USA economy might undergo a sharp
slowdown during the 2005-2007 period, thanks to
the restrictive fiscal policy, together with a monetary
policy marked by moderate increases of the official
discount rate, to allow for a growth of national savings
and therefore a reduction of twin deficits. As
regards Japan, after the disappointing growth levels
of 2004, its economic development outlook shows a
slight improvement. In the next three years, a positive
contribution to the trend of growth in the Eurozone
might come from investments, necessary to update
processes and improve profitability, which at the moment
are driven by a remarkably favourable financial
situation and by the plenty of liquidity detained by
enterprises;
• the outlook as regards Italian growth for the 2005-
2007 period is still on the feeble side. Consumers
confidence remains under the historical average:
the lack of a structural improvement in the labour
market might continue to weigh on the sentiment
of families. Enterprises might further slow down the
reorganization process and the Italian industrial system,
moreover, appears to have no particular defences
against the growing globalization and the strong
development of international trade;
• short-term interest rates should follow a growing
trend both in the USA and in Europe. In the Eurozone,
in particular, the start of a restrictive monetary
policy, following an acceleration of economic growth,
should limit the widening of spread with respect to
the US curve. In the USA, only in the event of strong
inflationatory tendencies, which is however deemed
unlikely to happen, would justify a more remarkable
increase of the official discount rate by the Fed. Such
considerations are grounds to believe that long-term
interest rates, even if expected to grow, should not
record a strong rise;
• a likely improvement, even if gradual, of US twin
deficits in the next three years should allow for a
stabilization of the US currency in terms of real exchange
rates.
In connection with such a scenario, the following
trends are forecasted for the Italian banking and financial
system on the whole:
• feeble expectations for a growth of profits, as against
the reduction of unit margins and the economic
trend of the country;
• worsening of credit risk in the above mentioned
three-year period as a consequence of the continued
loss of competitiveness of Italy, more clear in the
traditional manufactoring sector (for example textile
and clothes);
• likely transformation of advisory and asset management
structures following the new and more restrictive
regulations and the remarkable drop of profitability
of assets, as a consequence of a reallocation
of customers portfolios, of the current level of rates
and of the introduction of new specialized (ETF etc.)
and alternative products (hedge funds, private equity,
real estate investment trusts). Higher responsibility
of intermediaries towards customers as far as
their investment choices are concerned;
• further integration of European markets even as regards
regulations. The adoption of IAS (International
Accounting Standards), of the European Directives on
investment services and savings taxation and of the
Basel II Capital Accord will favour, besides having other
effects, the reduction of barriers to the entrance of
foreign competitors in our market, side by side with
the entrance of Italian players in foreign markets;
Consolidated annual report 2004 - 205