26 October, Investire Oggi
The spike of spread fosters the tensions in the banking sector. The Government is evaluating a possible merger of Banca Mps, as La Repubblica wrote. The current administration realised that penalising the banks in a country relying so much on credit will stop the economic growth and the occupation.
More spread and more taxes mean less capital for banks, fewer profits and more funding costs for the sector, resulting in less credit for companies and a slower disposal of the old bad loans. An actual landslide, where, if no action is taken, will lead to serious difficulties for the weakest banks such as Banca Carige, Mps and Popolare di Bari, which will be soon followed by Banco Bpm, Bper and Ubi
According to Equita Sim, if we set the Cet1 attention threshold at 11% for venture assets, Carige will be down the SREP by 35 points, Mps above it by 35, and Banco Bpm will have a 1% excess, which “will expose it more to the market volatility”. Moreover, Banco Bpm has NPL transfers in the pipeline that the country risk for Italy will make less attractive. In 2017 the banking system disposed of NPLs for 70 billion, while of the announced transfers for the remaining 70 billion planned for this year, only half of them have been carried out. Because of this burden and the unfavourable economic situation, bankers are cautious about new investments.
It will be necessary new capital for new credits and to clean up the old ones. State bailouts are to be excluded: there is no public money. Moreover, considering the unpopularity of the instrument, it’s very unlikely to get the green light from Brussels, especially not before the private members will not have paid first, as the bail-in regulation requires. The issuance of bank obligations has been suspended since May, except for a bond of Intesa Sanpaolo at very high rates. Mps will try to ask for more time to the EU Commission regarding a subordinate loan scheduled for this year, while Carige will assign the purchase of the bonds is about to issue to its majority shareholders.
There is a solution, which the Treasury, bankers and consultant are hopeful for. It’s the possibility of mergers. This system has been already used, and it might solve the situation of some banks by creating bigger and stronger groups. The Government started discussing this possibility during the summit on 17th October. It would mean diluting the state-owned 68% of Mps with a bank selected among Ubi, Bper or Banco Bpm, creating in this way the third Italian bank and complying with the commitment of privatising Mps by 2021, as agreed by the Gentiloni administration with the EU.
Source: Investire Oggi
Translator: Cristina Ambrosi