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Cooperative credit banks: more time for ECB test. Maxi NPL transfers coming up
05 April, Il Sole 24 Ore
The future cooperative credit groups, Iccrea e Cassa Centrale Banca, are currently working on the operational plan to operate as groups that might be launched at the beginning of next year. There is also an encouraging element. In fact, the comprehensive assessment by the ECB might be postponed. The asset quality review and the stress test were originally scheduled for autumn 2018, but they might be postponed to the first quarter of 2019, when the two groups will have obtained the authorization from the Surveillance Authority. That makes a lot of difference. In the meanwhile, the banks are working on cleaning up their financial statements. Since the ECB tests are based on the performance referred to the previous year, the results will be definitely better if the tests are carried on the 2018 figures. Furthermore, the groups will have to opportunity to avail themselves of the early warning power as regulated by the contract, hence they’ll be able to check on those banks that are not compliant with the regulation.
In the meanwhile, the groups have started an internal comprehensive assessment at the beginning of the year as suggested by the ECB in order to assess their financial strength and the sustainability of the business plan before submitting on 2nd May the official request to the surveillance authority to operate as group. The professionals from Banca d’Italia and the ECB are already working with the two banks to check the smooth execution of the process. The crucial part is the stock of bad loans and the measures adopted for their disposal. Iccrea has gross debts of approximately 20 billion, 9.7 billion net. Of this, 4.3 are net bad loans, as recently stated by the management of the group. Iccrea has been studying lately an NPL transfer operation: the first tranche of 800 million will be transferred in June with a securitisation using state guarantee (Gacs). The business plan includes also another tranche for the value of 3.5-4 billion over the next two years. It’s likely that once the request to operate as group will be submitted, the authorization will be released shortly after. Hence, it’s possible that the extraordinary meeting of members will gather already in October to decide on the cooperative credit banks adhering to the group.
Whereas Cassa Centrale Banca has recently gathered in Bari around one hundred cooperative credit banks involved in the same process as Iccrea, and it’s currently working to submit the official request to the ECB on 4th May. The group has a gross NPL ratio (the ratio between bad loans and total assets) of 16.5%. The objective is to reduce the ratio to 8% by the end of the business plan on 2021. An ambitious goal that is supported by a good equity level with a Cet1 set at 18.4% at the end of 2017. There is the plan for a transfer bad loans for 2.1 billion in three tranches. One billion will be put on the market by the end of the year with an ad hoc operation which is currently on, involving 48 cooperative credit banks that have selected the portfolios to transfer (taking advantage in this way of the first time adoption as regulated by the new Ifrs9 accounting principles). The second tranche will amount to 740 million and it will be carried out through securitisation, the operation will be launched at the beginning of the next year. Finally, in 2020 NPLs for 300/400 million euro from 30 cooperative credit banks will be transferred. The governance of the future bank has been already drafted: 15 members at the Board of Directors, 7 of which will be independent and external councillors (Ceo included), and 8 members representing the affiliated banks.
Source: Il Sole 24 Ore
Translator: Cristina Ambrosi