World's old­est bank faces yet an­other reck­on­ing

The Pak Banker - - FRONT PAGE - NEW YORK -AFP

Af­ter a decade of scan­dals and mul­ti­ple bailouts, Banca Monte dei Paschi di Siena SpA is back in the spot­light. This time, the Ital­ian gov­ern­ment is shop­ping around the 1.5 bil­lioneuro ($1.7 bil­lion) lender ahead of a Euro­pean Union dead­line for Rome to exit the bank next year.

Loaded with le­gal risks that dwarf its mar­ket value, any in­vestor will be loathe to buy Monte Paschi with those li­a­bil­i­ties not least in the midst of a pan­demic.

The risk to Ital­ian tax­pay­ers is that Rome off­loads its ma­jor­ity stake in the world's old­est bank at any cost. A sale to UniCredit SpA, as is be­ing dis­cussed, might solve Italy's im­me­di­ate prob­lem of meet­ing the EU dead­line, but the big­ger bank would de­mand strong fi­nan­cial guar­an­tees. A Paschi merger would also make it harder for UniCredit to pur­sue more com­pelling deals.

It's no sur­prise that Italy has restarted talks with UniCredit to sound it out on Monte Paschi. For­eign banks haven't shown much in­ter­est and In­tesa San­paolo SpA, UniCredit's main ri­val, is busy buy­ing UBI, an­other lender that might have made a good merger part­ner for Paschi.

Equally pre­dictable is that UniCredit is push­ing back. The com­pany wants the gov­ern­ment to cover any cap­i­tal short­fall from a po­ten­tial merger and the le­gal costs, ac­cord­ing to press re­ports. His­tory isn't on Rome's side. In 2017, the state funded In­tesa's pur­chase of two fail­ing lenders.

Why would UniCredit ac­cept any­thing less this time? Chief Ex­ec­u­tive Of­fi­cer Jean Pierre Mustier has fo­cused on re­turn­ing cap­i­tal to share­hold­ers af­ter clean­ing up his own bank. Strate­gi­cally, tak­ing over an­other mid-tier Ital­ian lender, Banco BPM SpA, makes more sense. A BPM deal would re­in­force

UniCredit's po­si­tion in Lom­bardy, the eco­nomic en­gine of Italy.

A merger in Ger­many, UniCredit's sec­ond-big­gest mar­ket, would be even more com­pelling. While cross­bor­der deals re­main dif­fi­cult in Europe, if Ger­many's Com­merzbank AG were to come up for sale, UniCredit would be bet­ter off pur­su­ing that pur­chase.

The rea­son Mustier is be­ing pres­sured over Paschi is that other av­enues for the ail­ing lender are much less ap­peal­ing. A com­bi­na­tion with Popo­lare di Bari, which Italy is in the process of res­cu­ing, wouldn't re­turn Monte Paschi to pri­vate hands.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.