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Merged Pop Vicenza and Veneto Banca capital increase seen at €3 bn

by Katy Mandurino

The restructuring plan for the two banks is now written in black and white. The ball is in the court of the European Central Bank, which will discuss the document today in a meeting with Popolare di Vicenza (BpVI) and Veneto Banca.

“(BpVI CEO) Fabrizio Viola presented the plan,” said the bank’s chairman Gianni Mion, as he left a board meeting in Milan. “Now the discussion starts with the ECB, and we will see what it will say,” he said.

No details were disclosed about the plan, which was presented yesterday also by the CEO of Veneto Banca, Cristiano Carrus, during a board meeting of the bank in Rome.

However, the content of the plan is not secret: the necessary recapitalization, the future of NPLs, possible solutions to boost liquidity, eventual layoffs, and reimbursement of shareholders who lost money.

Discussions are reportedly focusing on three directions and will continue in the coming weeks, until February 21, when the board of Banca Popolare di Vicenza is expected to approve the plan prepared by CEO Fabrizio Viola.

The three directions concern the merger with Veneto Banca, the sale of NPL and the capital increase. No decision has been taken on the size of the rights issue. If yesterday morning speculation circulated about a recapitalization of €5.7 billion, in the afternoon sources close to the Veneto banks said that the figure is too high and the capital requirement of the combined bank should be “significantly lower,” more likely of around €3 billion.

Uncertainty remains also about the size and possible securitization of the bad loans. Will a bad bank be created to transfer around €8 billion of gross NPLs - €1.7 billion of net NPLs for Veneto Banca (€3.6 billion of gross loans) and €1.9 billion for Popolare di Vicenza (€4.6 billion) – with the spinoff of the good bank in order to sell it on the international markets?

Or will there be a state-backed securitization that should involve the main shareholder, the Atlante rescue fund? Mion said it’s “premature” to speak of a role of Atlante.

Another issue discussed yesterday was liquidity, and the problem of bonds maturing in 2017 for a total of around €3.3 billion. While the sale of 40% (20% owned by Vicenza and 20% by Veneto Banca) by Sgr Arca is likely confirmed, other disposals are also being considered.

Another possibility includes the issuance of new bonds, backed by public guarantees. The European Commission has given the green light to the offering, while the Bank of Italy still has to decide.

The industrial plan prepared by Viola targets a lower cost-to-income ratio (Popolare di Vicenza is currently at around 83.6% and Veneto Banca at 104.8%): Viola wants to bring the ratio down to 50%. The number of redundancies, reported to be around 2,500, is also likely to be confirmed.