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Veneto banks still hover on the brink of collapse

by Katy Mandurino

The underlying feeling remains uncertainty and the prevailing sense of impotence, conditioned by 2016 losses and the endless wait for answers from Europe for an approval of a recapitalization that the ECB has set at €6.4 billion to save the banks from collapse.

Banca Popolare di Vicenza (BpVi) and Veneto Banca are “hanging” on the green light from European Union antitrust authorities for approval of a rescue, likely at this point to be made by the Italian state which would dilute the two banks’ controlling shareholder, the Atlante recue fund.

Without this, “doubts remain on the business continuity of the bank,” BpVi's Chief Executive Fabrizio Viola said yesterday. “In March and April, we received no new information to change the assumption that prospects for the bank’s future as a going concern in uncertain. We hope to conclude in a rather brief time, because the uncertainty the bank is facing is certainly not a condition for starting over.”

He was echoed by his counterpart at Veneto Banca, Cristiano Carrus: “The theme, along with that of the merger, is subject of continuous close discussions with European supervisory authorities, the ECB, the Directorate General for Competition, the Bank of Italy, and the government. The timing could be brief but the operation is not easy, because it foresees a large injection of capital that at the moment can only be given by the state, as they are not private shareholders who are interested in investing.”

And in fact, words from Alessandro De Nicola, representative of the Atlante fund, the banks’ controlling shareholder with more than 99%, confirmed what was said by Carrus: “It is highly probable that Atlante soon will no longer be the controlling shareholder of these banks. Now new and big recapitalizations are needed that are not in the scope of private investors.”

The meetings yesterday were called to approve the two banks’ accounts for 2016. BpVi closed the year with a loss of €1.9 billion (compared to a loss of €1.4 billion in 2015) and Veneto Banca had a loss of €1.5 billion (versus a loss of €881.9 million in 2015). The former was weighed down by provisions and adjustments worth €1.72 billion; direct funding lost more than 14%.

Viola said one of the most serious problems “was the significant growth in deteriorated credit: bad loans rose 17% and unlikely-to-pay loans grew by 4%”. In 2016, Veneto Banca registered a 17.8% fall in direct funding and an operating loss of €176.9 million. Adjustments on credit and other activities amounted to €1.293 billion (+58.7% compared to 2015) with €433.6 million in provisions for risks or costs linked to legal risks on shares sold to investors.

At the end of last year, the level of liquidity was 70.15% -- just above the minimum limit requested by the ECB, and up from the 53% registered in 2015, while in February, thanks to the issue of €3.5 billion in state-backed bonds, that level reached 128%.

“We lost 5% of clients and from here we want to start over,” said Carrus, underlining that it is a positive sign of confidence that the €249 million payed to shareholders that took part in the transaction offer had remained on current accounts of the bank, as confirmed also by Popolare di Vicenza.