MILAN – Sale of non-performing loans to 10 billion, and subsequent capital increase of up to 5 billion, although analysts will already be a success to be able to collect half. Are the next steps which is called the Monte dei Paschi, in view of the results of the EBA stress test that will strip the weakness in the evening of Friday.
The title of the Monte closes positively by 2.66% Piazza Affari: the market seems to appreciate the progress reported by the chronicles in the project for commissioning safety institute. According to reports, in fact, MPS is preparing to announce, perhaps as early as Friday after the disclosure of the stress test results, the plan for the sale of 10 billion net impaired loans (also because the Atlas Fund), which will lead to capital increase of up to 5 billion.
While the first part of the structure seems altogether clear, with the fund led by Alessandro Penati active on the median quality tranches and a bridge loan from JP Morgan to put on the market the best loans, assisted by Gacs State guarantee, the second aspect are still many question marks. Starting from accepting the transaction by the market, only one who could avoid public involvement in the operation. A strengthening of the capital so impressive, in fact, noted the analysts, remains unknown, especially in light of the current MPS market capitalization of € 850 million.
If the consortium consisting of JP Morgan and Mediobanca will not guarantee the increase, as it seems, a speech by Treasury would call into question the “burden sharing” ie the sharing of losses due to the devaluation of the loans by the subordinated bondholders. And their possible options, perhaps by converting their securities into shares of Mount stronger, it still works. The Finance Minister, Pier Carlo Padoan , answering the questions of the Chamber said that the banking system “remains solid and the problem of bad debts will be addressed neatly over time. The results of stress tests” will highlight ” individual cases of particular concern “but not of” criticality of the system. ” He reiterated that the rules on bail-in already provide flexibility and do not rule out that they could act immediately with a “backstop” a public safety net. As for Monte, for the holder of the Treasury the banking system “is able to implement effective and sustainable solutions to any market in the face needs a capital increase and disposal of non-performing loans, also taking advantage of the tools made available by the government as the Gacs and diagrams that provide an acceleration of bankruptcy proceedings, and of course private tools such as Atlas. Solutions that the government is following with interest and attention in respect of its powers. “
There remain doubts of the experts. “Five billion increase in our opinion are a target amount as the current market conditions make it possible to collect a much lower amount,” write for example Equita Sim analysts. According to experts, a wake comes from the fact that the “maximum discount on Terp (the theoretical share price without the right for the subscription) would be 14% against 38% of the final steps in confirming a very high risk “to bring home the operation. In the estimates of the Milan sim, the increase is limited to 2 billion. Credit Suisse insists rather on the positive aspects of the story and says that the sale of the complete package of Atlas and suffering on the market would reduce the amount of non-performing bank exposures to a rate of 15%, below the 20% limit as indicated by the ECB . Texas ratio, measuring the weight of overdue loans on the bank’s balance sheet, after the 77% drop increase (the critical threshold is 100%) and a bank so cleaned up it would be a good target for other institutions. Within the report it is estimated that, without the burden of NPL, the Sienese institute profits in 2017 could rise from 230 to 800 million euro.
On the fate of Monte ahead of stress tests eba also reason Barclays analysts, who believe that if the EBA exercise does not act as a trigger for to solve the problem stock to 50 billion loans difficult Mps, then it will be seen as a failure by the market. On the other hand, however, the British bank that annotate a tailored solution for the Siena bank, and not replicable on the whole system, it is likely to be just one short breath buffer. The overdue loans of the Monte dei Paschi in fact represent only 13% of the 360 billion npl (non performing loans) of the Italian banking system and the next uncertainty about the economic prospects of the country or of credit quality, may occur doubts about new institutions. In short, it is not solving the problems of the Mount only that you will have a definitive revival of Italian banks.
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