05 November, Il Sole 24 Ore
Banco Bpm Ceo Giuseppe Castagna is happy for having passed the Eba and ECB stress tests, although the challenging current scenario penalised the result. The Ceo talked with Il Sole 24 Ore about the de-risking process which is one year ahead the NPL disposal plan agreed with the ECB; the balancing of the obligation portfolio to reduce the weight of BTPs; the hope that the Government will take action to reduce Italy’s country risk which deters the issuance of credit to companies.
How do you evaluate the result of the stress test?
We’re happy with the result despite the adverse conditions. Regarding the base test, we’re at the top in Europe having proved the solidity of the merger of Bpm and Banco Popolare and our capacity to create value. We’d shown to be resilient in front of the adverse scenario, despite the parameters of the stress test don’t take into account of the peculiar characteristics of our bank, the only in Europe to have carried out a merger of these dimensions.
At the same time, you’re also at the bottom of the European chart. Are you worried?
No, because, as I said, we must consider that, unlike other banks, we come from a recent merger and we’re still dealing with the extraordinary phase of the reorganisation. Concerning the variation between the starting point and the landing point in the adverse scenario, we’re better placed than other banks in Europe. We must not forget that the stress test is based on the data of December 2017, it thus didn’t consider the 5 billion de-risking plan carried out in June 2018. Moreover, the merger one-off costs had been considered as recurrent rather as one-time costs. This means the cost structure will also improve for Surveillance purposes.
When you merged, you agreed with the ECB a de-risking plan concerning the disposal of NPLs for 8 billion till 2019. You’ve already reached 10 billion. The market expects now you to go on. If you transfer NPLs for other 8 billion, you’ll reach 18 billion by 2018, more than the double of what you agreed with the ECB and one year earlier. Are you going to launch the operation by the end of the year or are going to postpone it due to the uncertain markets?
We intend to launch the operation by the end of the year. The three teams competing for the NPLs seem to be determined on the purchase, and we expect their offers by mid-November.
Will the NPL transfer have a negative impact on the capital?
We’ll see whether and how much the offered prices will be impacted by the changed market conditions. The possible capital deficit may be replaced by a new business organisation of our consumer finance products.
Are you looking to list Agos-Ducato on the Stock Exchange or to sell your interest in Credit Agricole? And how Profamily, the company managing and distributing consumer credit for the former Bpm group, will be reorganised?
We’re currently studying this topic together with our partner Credit Agricole. As or group includes two consumer credit companies, it’s clear that partnerships will be necessary. The operation currently under negotiation is not only financial, but it also has business purposes. Concerning the optimisation strategy, an operation between the parts is possible as well as is an IPO.
Are you going to sell also your 14.6% quota in Anima Holding?
No, we don’t think it’s necessary. Let’s say that it might be a liquidity reserve in case of future shocks, which I honestly don’t wish to myself.
Your exposure towards to BPTs, currently on the rise due to the spread, is eroding your capitals. Do you think to reduce the weight of the Italian bonds in your portfolio?
The data on the exposure will be released in the next week with the quarterly report. I can say that we’ve started a series of actions to rebalance the quotas of Italian and foreign bonds in the portfolio and we modified the quota of BTPs to keep until the maturity and those available for sale.
Did you sell BTPs?
We rebalanced our portfolios reducing the risk due to the increased rates.
Are you more worried about the spread reaching 300 points or for the GDP that dropped to zero in the third quarter?
In the short-term, banks are more impacted by the increase in the spread. We’re now at 300, and the shock has been absorbed. It’s important that it set at these levels. But for Italy, the higher rates cause a higher interest on debt, meaning higher costs of credit for households and businesses. The signs of a slowdown of the economy generally create a lack of confidence in the future.
Is it true that banks started rationing credit by asking some companies to return their credit lines?
For what concerns us, we haven’t restricted our credit policy. However, if there is no confidence in the markets and the national economy doesn’t resume growing, investors and companies will postpone new investments. And banks will restrain issuing credit.
How can we restore confidence in Italy?
The worst would be a possible downgrade of Italy to “junk”. We’ve avoided that risk for the moment, but let’s not forget that we’re being monitored. There wouldn’t be so much uncertainty, even among investors, if we found a compromise with the EU aiming at restarting investments.
Source: Il Sole 24 Ore
Translator: Cristina Ambrosi