Title Unicredit in the sharp decrease in Piazza Affari (-5% to 12.20) waiting for details on the capital increase by 13 billion euros. Today he holds the board of directors for the examination of the accounts, but the meeting is evidently preparatory to the share capital increase which the board Wednesday set the price and terms. The recapitalization could start on Monday 6 February.
In the last hour it has emerged that the financial situation of Unicredit at the end of 2016 will not be in line with the european directives: risk, time, interest coupons and dividends. And’ what has been learned from the registration document filed today in the Consob and by the bank itself and on the upcoming capital increase that the institute is preparing to tackle starting next week. A dossier of 1049 pages to which the Authority of the financial markets, the Italian has given the go-ahead.
In the dossier, in particular, are highlights of the risks to which the institution would face in the event the recapitalization is not completed. One thing is certain: the effect of the time lag between the actions foreseen in the strategic plan, with a negative impact on the numbers of the group, the execution of the capital increase and the transactions of sale of assets, the capital ratios at the end of 2016 will not be in line with the objectives of the Srep. At December 31, 2016, in fact, the Cet1 phase-in will be equal to approximately 8%, tier1 capital ratio of 9% and the Total capital ratio to 11.5%.
In consideration of the above-mentioned non-compliance with the capital requirements, Unicredit will not proceed “until the restoration of the capital requirements are not met, the distribution of dividends and the payment of the coupons of the instruments Additional tier 1 capital”, stressed Gae Aulenti. In the immediate term, this means that “if the capital increase is not subscribed or had subscribed partially, the issuer may not pay the coupon relating to the instruments of Additional tier 1 due in march 2017 and would have limitations on the dividend distribution policy”.
In detail, the implementation of the strategic plan has produced a negative effect on the accounting books of the group and the level of capital that the economic overhead of 12.2 billion euro, in good part due to the increase of the degree of coverage on the loan portfolio subject to transfer in the framework of the project “Up” and loans the object of the project “Porto”.
The project Up, as pointed out by the institute on 13 December, provides a de-risking, in two phases, to be completed by the end of the plan 2016-2019, of 17.7 billion euros of gross loans defaulted by a portfolio of securitized loans for which the bank will sell to investors a share homogeneous equal to at least 20% in the first phase in 2017. Instead, the Port project aims to improve the quality of the assets with maneuvers that have led to value adjustments on receivables, in the last quarter of 2016, for a total of about 8.1 billion.
a negative Impact also on the front of the supply. The sale of Pioneer and the investment in Bank Pekao, considering only the economic components recurrent, it will cause a contraction on a pro-forma for the first nine months of 2016 related to the intermediation margin and operating income equal, respectively, to 1.86 billion and 948 million.
it is Not discarded, in addition, the hypothesis writedown of the investments in the funds, Atlas and Atlas 2: “it is Not possible to exclude the possibility that, if the value of the assets in which they have invested and/or invest the funds in the Atlas were to be reduced, such a circumstance may result in the need to devalue the shares of the funds with consequent impacts on the capital ratios of the group.”
In detail, at the end of September, Unicredit had paid to the Atlas, in front of a total investment of 845 million to approximately 504 million. To these were added 182 million in the fourth quarter of 2016, the value that has been revealed to the irrevocable commitment by Gae Aulenti for subsequent payments to 159 million. With reference to the Atlas 2, however, Unicredit has committed to subscribing shares for 155 million, equal to 7,19% of the total of 2,155 billion, of which 1.1 million has already been paid.
The experts of Banca Imi, taking into account the provisions for the extra, we expect Unicredit to a loss of 10,35 billion. However, “despite the substantial overhang on the action, we retain our positive vision”, concluded the analysts, confirmed the ratings add and the price target to 30 euros. According to Equita (hold with a price target to 31 euros), the fourth quarter will be weak, with revenues of € 4.9 billion, operating income amounted to 953 million, a net loss of $ 14 billion and a Cet1 at 7.7%.
In the registration document, also, we read how, in the framework of the Srep 2016, the european central Bank has highlighted a number of areas of weakness as the credit risk, in particular the high level of non-performing exposures, the liquidity risk, the risk connected to operations in Russia and Turkey, and the persistence of a level of profitability that is weak.
Therefore, within the next 28 February, Unicredit shall submit to the Ecb a “strategy of non-performing loans, supported by an operational plan to deal with the issue of the high level of non-performing loans”. Currently, Unicredit is subject to the four on-site inspections by the central Institute, and is waiting to receive the results of the audit by the Ecb relative to the market risk.
All things considered, “there is a risk that where” Unicredit “was not able to restore the capital requirements applicable, including through the use of extraordinary measures different from those envisaged in the strategic plan, it may be necessary to the application of resolution tools”, as foreseen by the european directive on the resolutions on banking, which introduced the mechanism of bail-in, has specified the institute.
This afternoon a new board of directors of Gae Aulenti. The meeting will be used to develop the final details of the strengthening of the balance sheet on which it rests, the strategic plan set by the chief executive officer, Jean Pierre Mustier. According to press rumors leaked over the weekend, the fact rather unusual, that the capital increase started before approval of the accounts for the last financial year could be the reason for the meeting today: in the statement of the increase could be, in fact, have to enter some digits of the results in 2016. From here the need to proceed in the day, a preliminary examination of the accounts.
The management would like to launch the recapitalization by eur 13 billion at the beginning of next week, in order to close the transaction by the end of February. Another cda should be summoned for Wednesday next to the approval of the prospectus and the definition of the price range of the capital increase. According to the analysts at Icbpi (rating buy target price to 29 euros), the acceleration of the timing may be due to the desire of management to “take advantage of the good intonation of the markets, avoiding the risk of realizing the operation at most unfavourable conditions of the existing ones”.
In the meantime, the president of the Fondazione Cariverona, Alessandro Mazzucco, speaking to a local newspaper, has reiterated that the final decision on joining or not to the capital increase of Unicredit , whose subscription to the share currently held, or 2,23%, would result in an investment of approximately 290 million, which will be taken by the governing bodies of the institution in the first days of February. However, the Foundation is not a bank, has written in its statutes, which must remain for life in Unicredit . There will be up to when the investment will respond to your needs”.
CariVerona, has continued Mazzucco, define “in what terms to give continuity to the membership,” also “paying attention to the roof of the 33%”, fixed by the protocol, in Acre-Mef, 2015 for the participation of a Foundation in their respective banks. With regard to a possible desire to become part of the board of directors, finally, the president of the institution scaligero has denied any voice.
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