It’s not the first, and it will not be the last. But today will be a watershed for Monte dei Paschi di Siena. The world’s oldest bank will raise the curtain on its current and future financial health by releasing its quarterly earnings and the 2017-2019 industrial plan prepared by Marco Morelli, appointed as CEO just over a month ago.
The plan is not like others. It will show the way forward for the bank after the disposal of €27 billion gross non-performing loans through the largest securitization ever done in Italy, and convince the market that it’s still worth investing in the restored MPS by taking part in the planned €5 billion capital increase by the end of the year.
The transaction is not easy. The bank plans to reduce the size of the capital increase by offering bondholders to voluntarily swap part of their subordinated bonds. The financial market, mostly Qatar and US funds, is sending signs of interest. On the Milan stock market, the stock has jumped 56% last week, bringing the bank’s capitalization back to around €800 million. The market is clearly awaiting the plan, expected to focus on cutting costs.
But the stock surged also on reports of an alternative plan sent one week ago by Corrado Passera, former CEO of Intesa Sanpaolo and a former minister in the government led by former Prime Minister Mario Monti: although it is unlikely that the plan B replace the one prepared by JPMorgan and Mediobanca (and approved in July by the ECB), the presence of an alternative - which would reduce the recapitalization to €3.5 billion – and of some investors, mostly private equity funds, was welcomed as good news.
The industrial plan to be released today comes one week after another historic event for the Italian banking system: last Saturday, the shareholders of Banca Popolare di Milano and Banco Popolare agreed to end their cooperative status (mandatory by the end of the year) and merge from January 1, 2017, approving the first such deal in Europe since the creation in 2014 of the European Central Bank’s single supervision.
By merging, the two banks will create Italy’s third largest lender behind Intesa and UniCredit (which is also working on disposals, recapitalization and reorganization of its business): after years of impasse, something is moving toward inevitable consolidation, given the crisis of profitability shared by European banks and made worse in Italy by the presence of €84.7 billion of net non-performing loans.
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