MILAN (Reuters) – Italy’s Monte dei Paschi (MPS) said on Thursday it was working to reduce its legal risk as the European Union assessed the ability of state-owned banks to stay in business before opening up more public aid.
Italy saved the MPS in 2017 at a cost of 5.4 billion euros ($ 6.6 billion) to taxpayers. Now it stands ready to cover at least part of the 2.5 billion euro shortfall in lenders, but wants to first find a buyer for it.
MPS said it would proceed with a cash call if the merger failed to materialize.
In a statement on Thursday, it said that significant uncertainty was clouding its planned capital increase due to an assessment by the EU competition authority on the bank’s ability to stand on its own.
ROME (Reuters) – Italian Prime Minister Mario Draghi’s new government aims to tackle troubled bank Monte dei Paschi by pushing a plan to re-privatize its losing lenders, said sources close to the matter.
Rome spent 5.4 billion euros ($ 6.6 billion) in 2017 to rescue Tuscan banks, leaving the state with a 64% stake. MPS now needs another 2.5 billion euros to rebuild its capital reserves.
A sale would stop the MPS from becoming a permanent taxpayer drain and would allow Italy to fulfill its commitments to the European Union made at the time of the bailout.
With Italy’s change of government, there is speculation that Draghi, the former head of the European Central Bank, could use his cachet with European authorities to buy more time and delay the sale of MPS.
But a source briefed on the government’s plans said both Draghi and Economy Minister Daniele Franco intend to continue working to seal a merger deal for MPS with stronger rivals.
The prime minister’s office declined to comment.
Finding MPS buyers has proven difficult despite the ample incentives from the Ministry of Finance to sweeten the deal.
Italy has negotiated the sale of MPS to UniCredit but a change at the helm of Italy’s second-largest bank has halted talks.
New UniCredit CEO Andrea Orcel, who started his job after mid-April, may prefer other options in Italy’s consolidated banking sector, sources said.
With the sales prospect fading in the near future, MPS auditors have expressed concern about the bank’s financial future, said three people with knowledge of the matter.
The MPS is working to ensure auditors sign off on its accounts, a formality required for Thursday’s board meeting, the people said.
MPS declined to comment.
Annual losses at Tuscan banks jumped more than 60% to 1.7 billion euros last year.
Reported by Giuseppe Fonte in Rome and Valentina Za in Milan. Edited by Jane Merriman
ROME (Reuters) – Italy’s Ministry of Finance is working to halve the 10 billion euros ($ 12 billion) in legal claims facing Monte dei Paschi by laying off some and settling others, including 3.8 billion euros in requests from top former investors. bank, a source close to the matter. the word.
A raft of legal disputes on the legacy of Monte dei Paschi (MPS) after decades of mismanagement hampered Rome’s efforts to re-privatize the losing bank it saved in 2017.
Time is running out for Italy to overcome MPS woes by finding a buyer. Changes at the helm of UniCredit have halted talks on possible cooperation with Italy’s No.2 bank.
The Ministry of Finance has been studying for months how to free MPS from its legal risks and solve cases that symbolize Italy’s longstanding banking crisis.
To be able to cut 64% of its stake in MPS, Italy still needs to find a solution to the remaining risk of 5 billion euros.
Rome is now focused on ways to circumvent the fact that banks will be held accountable by anyone who takes them under the joint liability rule in Italian law, the three sources said.
The plans under consideration require a guarantee scheme based on an insurance and reinsurance agreement involving state export agency SACE and other private players, they said.
MPS will outsource claims handling to another state-owned company, Fintecna, considering its experience in legal disputes.
CASH AND SHARES
If that plan doesn’t work, the government will revert to a previous scheme where the legal risk itself would be transferred to another, undefined entity, a source said.
Previously, Roma worked with MPS to help it settle claims from its former major shareholder, the local foundation Fondazione Monte dei Paschi di Siena, the sources said.
Fondazione MPS has seen its wealth evaporate and its controlling stake in the bank eased to almost zero after supporting a string of cash calls at MPS in recent years.
Two sources said the foundation has so far rejected an offer from MPS to accept around 70 million euros in cash in exchange for dropping the claim.
MPS said it was confident it could fight the claim because it was based on a decision taken when the foundation held 49% of the bank’s capital and appointed half of its directors.
Both sources said the idea now was to offer shares and not just cash. MPS holds treasury shares equivalent to 3% of its capital with a current market value of 35 million euros.
The foundation has repeatedly denied any formal talks are taking place.
The Treasury Department believes a deal with Fondazione MPS and other settlements, as well as the dismissals, could broadly halve the initial figure, the sources said.
MPS’s capital ratio was set to breach the minimum requirements for this quarter. The MPS said on Thursday it will see 2.5 billion euros in cash demand if it is unable to seal the merger. ($ 1 = 0.8241 euros)
Reporting by Giuseppe Fonte and Valentina Za; editing by Emelia Sithole-Matarise
ROME / SIENA (Reuters) – State-owned company Monte dei Paschi is expected to provide access to confidential data to potential merger partners within days, three sources with knowledge of the matter said on Wednesday.
The opening of the data room, which marks the start of the process for the re-privatization of Tuscan banks, comes as Italy faces a government crisis after the junior coalition party on Wednesday withdrew its ministers from the cabinet.
Monte dei Paschi (MPS) has announced a capital shortfall of up to 2.5 billion euros ($ 3 billion) and will present plans to fill it to the European Central Bank at the end of the month.
While the Ministry of Finance continues to work to fulfill promises made to Brussels when it rescued the MPS in 2017, people say Rome will only be able to present an outline of planned steps for the bank and count on winning more time from the ECB.
In order to come up with a durable solution to bank woes, the Ministry of Finance is looking to conclude a merger deal for MPS and has focused on UniCredit as the ideal partner.
With UniCredit now in the process of selecting a new chief executive after CEO Jean Pierre Mustier said in November he would step down in mid-April, MPS is also looking for possible alternatives.
The MPS said on Monday that its advisers would explore options regarding opening up the data room. Apart from UniCredit, Banco BPM, BPER Banca, Credit Agricole Italia and BNL-BNP Paribas will also be explored, said two sources.
Asked about the list of names, both MPS advisors, Mediobanca and Credit Suisse declined to comment.
Banco BPM does not currently include MPS among possible merger options, but its advisers are ready to assess the situation if they are to be contacted, a source close to Banco BPM said.
BPER Banca declined to comment. Credit Agricole Italy and BNL-BNP Paribas could not be reached for comment.
Financial sources said Credit Agricole Italy, which plans to launch a takeover offer for smaller rival Creval, is not interested in MPS.
Entering the data room requires the signing of a confidentiality agreement, a step UniCredit has not taken despite contact with the Ministry of Finance regarding the terms of a possible deal.
Rome has worked out a package of measures that will ensure the deal will not harm the buyer’s capital reserves, a key condition set by UniCredit which, according to a fourth source with knowledge of the matter, will also apply to other banks.
But the main hurdle for sales is about 10 billion euros in damages claims MPS is facing after decades of mismanagement.
MPS Fondazione in July filed an extra-judicial claim of 3.8 billion euros against the bank, which the Ministry of Finance hopes can be scrapped as part of a settlement deal.
Chairman Carlo Rossi on Wednesday said the foundation plans to initiate legal action on the claim, although it remains open for discussion.
($ 1 = 0.8214 euros)
Reporting by Giuseppe Fonte in Rome, Valentina Za in Milan and Silvia Ognibene in Siena; Additional reporting by Andrea Mandala; Edited by Elaine Hardcastle and Steve Orlofsky
ROME / MILAN (Reuters) – Monte dei Paschi in Siena said it would give access to classified data to potential merger partners chosen by its advisers, as Italy goes ahead with plans to cut its holdings in the state-owned bank.
Confirming comments to Reuters from an earlier source on Monday, Monte dei Paschi (MPS) said his board had hired Credit Suisse to assist Mediobanca in the task of studying strategic options and exploring market interest for Tuscan banks.
Despite the chaos in the ruling coalition that risks triggering a government crisis, Italy’s Ministry of Finance is moving forward with plans to cut its 64% stake in MPS and fulfill promises made to the European Union as part of its 2017 bailout.
Rome has identified UniCredit as the ideal merger partner for MPS, sources said earlier, but Italy’s second-largest bank wants stringent terms to be met before considering the acquisition and has yet to sign a nondisclosure agreement.
The Ministry of Finance wants to see if Banco BPM, Italy’s third-largest bank which last year saw Rome as a possible partner of MPS, could be interested in entering the data space, said one of the sources.
Banco BPM could not immediately be reached for comment.
UniCredit, which is in the process of selecting a new chief executive after Jean Pierre Mustier decided to step down in April, will only consider a deal that does not affect its capital reserves.
They also want to ensure that an incentive package that Rome is preparing to facilitate sales will be approved in Brussels and Frankfurt, the sources said.
The UniCredit Board is expected to examine the list of candidates for CEO at a meeting on Wednesday before making a final decision in early February.
In the latest push to get the Milan-based bank to consider the deal, Rome is studying plans to divert at least 14 billion euros in non-performing loans from UniCredit to state-backed loan manager AMCO, sources said.
That could increase further to 20 billion to 21 billion euros, accounting for nearly all of UniCredit’s 22.7 billion euros in troubled debt at the end of September, one source added.
The Ministry of Finance has also set aside 1.5 billion euros to cover part of the capital shortfall of up to 2.5 billion euros in MPS.
The Siena-based bank will have to tell the European Central Bank in late January how it plans to fill the gap. The MPS said on Monday that it was pushing back around 10 days to January 28 a board meeting called for approving capital measures.
The tax cuts introduced by Rome for the 2021 merger would cost UniCredit a net profit of 2.4 billion euros if it took the losing MPS.
But the potential takeover is having resistance from within the bank as well as among some of UniCredit’s leading domestic investors.
To remove a major hurdle to a potential deal, Italy is working on a complex scheme requiring bail and a possible spin-off involving state-owned company Fintecna to deal with around 10 billion euros in claims, both in court and out of court, faced by MPS.
Reporting by Giuseppe Fonte and Valentina Za; Edited by Kirsten Donovan, David Evans and Jonathan Oatis