5,500 jobs to go as Italian bank restructures
Monte Paschi sets $1.6bn profit target
MILAN: Italian l ender Banca Monte dei Paschi di Siena SpA yesterday laid out a five-year restructuring plan that includes cutting thousands of jobs and selling assets as part of an agreement with the European Union that lets the bank receive €5.4 billion ($6.1 billion) in state aid.
“The lender plans to reduce headcount by 5,500, close 600 branches and dispose of €28.6 billion of bad loans by 2021,’’ the Siena-based bank said in a statement.
Monte Paschi targets a net profit of more than €1.2 billion ($1.6 billion) by then, with a return on equity at 10.7%.
“There is no Plan B and targets are achievable,” chief executive Marco Morelli said on a conference call yesterday. “It’s pretty much a conservative plan, we are not shooting for unrealistic targets in terms of growth of our top line and we do have a structural solution and a sustainable approach to asset quality.”
After months of negotiations, the European Commission approved a so-called precautionary recapitalisation of the lender after it was found to need state support to survive even though regulators have declared it solvent.
Monte Paschi turned to Italy for help after it failed to raise funding from investors in December.
“This almost completes the solution to critical situations in Italy and removes systemic risk on Italian banks, hinting at lower cost of equity for the system,’’ analysts at Mediobanca led by Andrea Filtri wrote
in a note.
The commission agreed to allow the state to inject €5.4 billion only after shareholders
and junior creditors contributed €4.3 billion to Monte Paschi’s rescue, as required by European Union rules to minimise the
costs of bailouts for taxpayers.
In all, after the planned reimbursements for misselling bonds to retail investors, Monte Paschi will receive €8.1 billion of fresh equity.
“Once the process is complete, Italy will hold 70% of the bank,’’ Finance Minister Pier Carlo Padoan said at a press conference in Rome on Tuesday.
In return for the state aid, Monte Paschi agreed to a restructuring that includes steps to improve efficiency and risk management.
“About €26 billion of bad loans will be sold by the first half of 2018 through a securitisation,’’ it said.
While the lender will ask for a state guarantee on the senior tranche, the riskiest portion will be sold to the privately financed Atlante 2 bank fund at about 21% of their gross book value.
Italy is struggling to fix a crisis-era legacy of about €313 billion of soured loans that’s holding back credit and weighing on its weak recovery.
Last month the government committed as much as €17 billion to wind down Banca Popolare di Vicenza SpA and Veneto Banca SpA after trying for months to find a way to keep the regional banks afloat.
Monte Paschi will also sell non strategic assets, including foreign units in France and Belgium, some equity stakes selected real estate properties.
The bank targets a common equity Tier 1 ratio, a key measure of financial strength, at 14.7% by 2021 and a loan-to-deposit ratio below 90%.
The European Central Bank in June requested that Monte Paschi keep from up a CET1 ratio on a transitional basis of 9.44%.
“With the Veneto banks sold and Monte Paschi’s revival in sight, Italy’s lenders are on the road to recovery and no more last-minute interventions by the state will be required,’’ Padoan said.
The state intervention is the biggest since Benito Mussolini seized banks in 1933 as part of his wholesale nationalisation of the private sector.