09 November, Il Sole 24 Ore
Credito Valtellinese launches a capital increase of up to 700 million. The Board of Directors of the bank has started the procedure for what it looks like a drastic measure, considering that the capitalization was set yesterday at 280 million euro. A Unicredit-style operation: the bank, in fact, increased its capital by 13 billion euro. The shares of the bank were impacted yesterday by these rumours, closing with a decrease of 13%. This capital injection (which will go live on 19th December, when the Assembly will gather) will certainly satisfy the ECB Surveillance Committee, especially with the new regulation regarding bad loans coming up. This maxi-recapitalisation has been higher than the expectations of the market, which was estimating an increase around 500 million. This is a “one-time decision”, explains the general director Mauro Selvetti, and it’s necessary to “to bring the bank back to an excellent position”.
It’s not by chance that yesterday the announcement was accompanied by a new strategic plan till 2020 – called Project Renaissance – aimed at bringing the bank back to a consistent “sustainable on the medium term” profitability and an asset risk profile that would place the bank among the “best in class” in Italy. This translates as: the coverage on bad loans is set at 77.7% by 2020 (compared to the current 61.5%) and at 47% on the unlikely to pay (37.1%). An effort that means adjustments on credits up to a maximum of 772.5 million euro and that, therefore, it will be financed by the capital increase approved yesterday, which is preliminarily guaranteed by Mediobanca and that should be completed by the first quarter of 2018.
Regarding the strategic plan, several portfolio derisking initiatives have been set in place. Starting from the launch of a maxi-securitisation of bad loans for 1.6 billion with a mandate to JP Morgan, Mediobanca, and BonelliErede. The project copies the Elrond operation closed last July, the “Aragorn” operation sees the use of Gacs (State guarantees) and should be completed by the first semester of 2018. In the plans there are also credit transfers for 500 million euro, to be done by the second semester of 2018, using the transfer with no recourse through an auction. At the end of all these operations, the gross non-performing loans are assessed to decrease below 10%, setting around 9.6%, with a coverage ratio of NPL s set at 59.1%.
The other part of the strategic plan concerns the operational efficiency of the bank. The objective is, as already said, the structural improvement of profitability starting from controlling costs. As a result of this, the decision of the bank of acquiring Credito Siciliano, closing 88 branches, and making approximately 400 people redundant throughout the duration of the plan (with 170 redundancies funded by the specific Fund), making the costs/profit ratio fall to 57.5% by 2020. These operations seem necessary considered the figures for the first nine months of the year, that reported an exposure of 403 million, especially due to credit adjustments. “This is for us our day one – explains to Il Sole 24 Ore the president Miro Fiordi – the new strategic plan will allow us to start all over. We’re bringing the bank back to the path of sustainable profitability and asset strength without excluding the possibility of mergers. This will make possible for us looking at the opportunities of the market that may arise from a position of strength”.
Source: Il Sole 24 Ore
Translator: Cristina Ambrosi