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UBI Banca to make offer for three rescued regional banks today

by Marco Ferrando

One euro from UBI Banca (and from Banca Popolare Emilia Romagna), more than €4 billion from the baking system.

In all likelihood, that will be the price tag of the rescue of Banca Marche, Popolare Etruria, CariChieti and CariFerrara under the EU “bail in” rules late in 2015.

It’s high, but at least it’s “final,” that is destined to close the book definitively on the sales.

The board of UBI is said to have approved a binding offer yesterday evening for the “good banks” Marche, Etruria and Chieti that rose from the ashes of the rescue, while BPER is expected to do the same for Ferrara next week.

UBI shares rose 1.7% yesterday and a formal announcement of the deal is expected early today outlining the timing and conditions for the acquisition. There are many, testament to a long and tortured process. UBI never wanted to consider a bailout, so before putting pen to ink it asked that the banks in question be whipped back into shape.

The Atlante fund, with €200 million, activated the securitization of €2.2 billion in non performing loans credit at a price of around 30% of its nominal value, and the Resolution fund, with about €500 million, will cover badwill.

To this €700 million, however, must be added to €2.35 billion already handed out by the Resolution fund in 2015, and to the €1.6 billion bridge loan that won’t be paid back. So the total bill for the rescue is well over €4 billion. That could be partly offset by the gains that the Resolution fund could account for in coming months with the sale of €9 billion in bad loans received from the four banks.

UBI will spend a symbolic 1 euro, sources told Il Sole24 Ore-ItalyEurope24, to acquire the three banks. It will also get €600 million in tax credits over five years.

It’s not a small amount and confirms that without incentives, no one is willing to buy traditional banking assets: it happened a year ago with the €240 million transferred from Barclays to CheBanca!, along with its 85 branches in Italy. It is repeating itself now with UBI and the 900,000 customers of the three banks, with more than €15 billion in investments and €18 billion in deposits.

The formal offer will need to be approved by the ECB.

The closing likely will have to wait until March, the deadline for Atlante to finish due diligence on the credit portfolio and start the securitization process. The three banks will go to UBI with a Cet1 above 9% and will stay parked outside the door for a few months: time for shareholders to approve the deal in April and above all for a €400 million capital increase, which is necessary to maintain its current Cet1 of 11.68%.

The capital increase will take place in mid 2017 with the right of options for current shareholders, with the historic allies, like Brescia, Bergamo and Cuneo, having already promised to take part.

As for the sale of CariFerrara to BPER, there’s still a few weeks to wait. Today, the board of the bank led by Alessandro Vandelli will look at the documents but will need time for more in-depth technical analysis