Banco Popo­lare CEO doesn't rule out cap­i­tal in­crease in M&A deal

The Pak Banker - - 6BUSINESS -

Banco Popo­lare SC Chief Ex­ec­u­tive Of­fi­cer Pier Francesco Saviotti is study­ing op­tions in­clud­ing a po­ten­tial cap­i­tal in­crease to meet the Euro­pean Cen­tral Bank's re­quests to back its planned merger with Banca Popo­lare di Mi­lano Scarl. "Our cap­i­tal is sound, but con­sid­er­ing that we want to do the deal and that the ECB in­sists in tak­ing ac­tions to im­prove it, we are re­view­ing a va­ri­ety of ini­tia­tives," Saviotti said at a press con­fer­ence in Lodi, Italy, af­ter the bank's an­nual meet­ing. "We can­not rule out 100 per­cent a cap­i­tal in­crease."

Ex­ec­u­tives at Banco Popo­lare and Banca Popo­lare di Mi­lano are rac­ing to reach a merger ac­cord that meets the ECB's de­mands af­ter a month of talks failed to as­suage the cen­tral bank's con­cerns over cap­i­tal and gov­er­nance. The ECB sent a let­ter urg­ing the firms to form a com­pany with a strong cap­i­tal po­si­tion and a trans­par­ent and ef­fi­cient gov­er­nance. Banco Popo­lare has "changed our mood" fol­low­ing the ECB's let­ter and will work to meet the cen­tral bank's re­quire­ments, Saviotti said. The CEO hopes to fi­nal­ize a merger agree­ment soon and ex­pects "im­por­tant syn­er­gies" from it.

The Ital­ian Trea­sury also said Fri­day that the banks' top ex­ec­u­tives are de­ter­mined to ful­fill the ECB's de­mands, adding that the trans­ac­tion is backed by all stake­hold­ers and in­vestors.

Banco Popo­lare is con­sid­er­ing sell­ing bad loans and non-core as­sets to boost cap­i­tal, the CEO said, rul­ing out the di­vest­ment of hold­ings in Agos Du­cato SpA, An­ima Hold­ing SpA and Aletti Gestielle SGR SpA since they'll pro­duce syn­er­gies and in­come in a merger. The ECB also asked the banks to sub­mit a mul­ti­year busi­ness plan for the com­bined com­pany within a month. The lenders said Fri­day they'll hold board meet­ings by March 22 to dis­cuss the lat­est de­vel­op­ments.

The ECB is push­ing Ital­ian banks to tackle an es­ti­mated 360 bil­lion euros ($406 bil­lion) of trou­bled and de­faulted loans that are un­der­min­ing new lend­ing and weigh­ing on the econ­omy. Their shares have tum­bled amid the in­ten­si­fied scru­tiny. Banca Carige SpA, told by the cen­tral bank last month to sub­mit a new fund­ing plan af­ter losses widened, has sunk more than 50 per­cent this year. Banco Popo­lare has lost more than 40 per­cent. A fail­ure of the merger would set back a long-awaited round of con­sol­i­da­tion that both the Ital­ian govern­ment and the ECB are seek­ing to spur lend­ing, strengthen banks and help the econ­omy re­cover from a three-year re­ces­sion. Italy ap­proved a law last year forc­ing the big­gest co­op­er­a­tive lenders to be­come joint-stock com­pa­nies, as re­stric­tions on own­er­ship and vot­ing rights for th­ese com­mu­nity-ori­ented banks have stood in the way of con­sol­i­da­tion.

"The con­di­tions im­posed by the ECB will have to be met at any cost," said Francesco Con­fuorti, CEO of Ad­van­tage Fi­nan­cial SA, a Mi­lan-based in­vest­ment firm. "If the deal is not signed, this will be a very bad sig­nal that would high­light the per­sist­ing weak­ness of the coun­try's bank­ing in­dus­try."

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