Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Saturday, December 28, 2013
Bailout Of World's Oldest Bank In Jeopardy, Rests On Hope That "Ship Does Not Sink" .......Italy's third-biggest bank Monte dei Paschi di Siena was forced to delay a vital 3 billion euro ($4.1 billion) share sale to raise capital until mid-2014 because of shareholder opposition, plunging its turnaround plan into uncertainty. ...... Nationalization in the cards ?
The ongoing debacle of Italy's Banca Monte dei Paschi (BMPS) took a turn for the worst today. The bank's largest shareholders (MPS Foundation) approved (read - forced through) a delay in a EUR 3 billion capital raise, which the bank needs to avoid nationalization, until May. The delay (which will cost the bank EUR 120 million in interest) allows MPS more time to liquidate their 33.5% holding before their stake is massively diluted. Management is 'considering' resignation and is "very annoyed," but the city Mayor is going Nationalist with his delay-supporting comments that "we cannot let the third biggest bank in this country fall prey to foreign interests." So Europe is recovering but they can't even raise a day's worth of POMO to save the oldest bank in the world?
Italy's third-biggest bank Monte dei Paschi di Siena was forced to delay a vital 3 billion euro ($4.1 billion) share sale to raise capital until mid-2014 because of shareholder opposition, plunging its turnaround plan into uncertainty.
The bank's chairman and its chief executive may now resign after their plan to launch the cash call in January was defeated at an extraordinary shareholder meeting on Saturday due to the vote of Monte Paschi's top shareholder.
The world's oldest bank needs to tap investors for cash to pay back 4.1 billion euros in state aid it received earlier this year and avert nationalization
Simple game theory really - why would the largest shareholder "guarantee" losses now when it can try and liquidate more of its exposure over time?
But the cash-strapped Monte dei Paschi foundation - whose stake in the bank is big enough to veto any unwanted decision - forced a postponement until at least mid-May to win more time to sell down its 33.5 percent holding and repay its own debts.
...
Antonella Mansi, a feisty 39-year-old businesswoman recently appointed head of the Monte dei Paschi foundation, said her insistence on a cash call delay did not amount to a no-confidence vote in the bank's management.
But she said that carrying out the capital increase in January would massively dilute the foundation's holding, leaving it with virtually nothing to sell to reimburse debts of 340 million euros.
"We have a precise duty to ensure (the foundation's) survival. You can't ask us to let it collapse," she said.
Management is "very annoyed"...
Chairman Alessandro Profumo, a strong-willed and internationally respected banker who was formerly the chief of UniCredit, said he and CEO Fabrizio Viola would decide in January whether to step down.
"These are decisions one takes in cold blood and in the right place," Profumo said at the meeting.
"What I have on my mind is a 3 billion euro cash call because we need to pay back 4 billion euros to taxpayers. Today this is uncertain and at risk," he told a press conference.
Viola, sitting at his side, told reporters he would do everything "so that the ship does not sink", but that he could not take responsibility for mistakes made by others.
Of course, there is risk either way...
"It's important to carry out the capital increase as early as possible," said Roberto Lottici, fund manager at Ifigest. "The risk is that the bank finds itself rushing into a cash call later at a lower price than what it could achieve now."
...
"It's hard to think that the third largest Italian bank can't find a pool of banks able to support the cash call after May 2014," said Antonella Mansi, the president of the MPS foundation, at the shareholders' meeting.
and given the number of jobs involved... local officials are now reacting in favor of the delay (hoping for domestic savior)...
But in Siena, where the bank is known as "Daddy Monte" and is thebiggest employer, fears that the cash call might sever the umbilical cord between the lender and the city run high.
Siena mayor Bruno Valentini, whose city council is the top stakeholder in the Monte dei Paschi foundation, said on Friday a postponement might help keep the bank in Italian hands.
"We cannot let the third biggest bank in this country fall prey to foreign interests," he said. "Monte dei Paschi is not just an issue in Siena, it is a big national issue."
So, even after all the lqiuidty provision; yields and spreads on European debt back near record lows; calls from US asset managers that Europe is recovering and will be the growth engine; and hopes that Europe's AQR stress test (and resolution mechanism) will be the gold standard for confidence in their banking system... they still can't find a group of greater fools to pony up EUR3 billion in real (not rehypothecated) money to save the world's oldest bank - that's a day's worth of Fed POMO!!!!
On an odd side note, we did note a major surge in ECB margin calls this week...
Monte Paschi chairman to decide in January on possible resignation
12 hours ago
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Banca Monte dei Paschi di Siena's Chairman Alessandro Profumo gestures during a news conference at the company's headquarters in Siena May 10, 2012. REUTERS/Giampiero Sposito
SIENA, Italy (Reuters) - Alessandro Profumo, chairman of troubled Italian lender Monte dei Paschi di Siena (BMPS.MI), said on Saturday he would decide whether to step down in January.
"These are decisions one takes in cold blood and in the right place, I have nothing to say," Profumo told a shareholder meeting.
He said a board meeting of the bank was scheduled to be held in January and he would take his decision then.
Speculation has been mounting that Profumo might quit because of a clash with the bank's top investor over the timing of a vital capital increase.
Monte dei Paschi di Siena, world's oldest bank, could be nationalised due to a shareholder dispute.
The world's oldest bank, Banca Monte dei Paschi di Siena (MPS), is in trouble again after sources revealed that chairman Alessandro Profumo may quit the bank if its top investor prevents him from raising €3bn needed to avoid nationalisation.
Trouble at MPS started when it was forced to except €4.1bn (£3.5bn, $5.5bn) of state aid earlier in 2013 thanks to the eurozone debt crisis and loss-making derivatives trades.
The bank needs to repay the money it received from the state in order to avoid nationalisation, according to Profumo.
He and CEO Fabrizio Viola want to launch a cash call in January 2014 to save the bank, and have asked the firm's shareholders to approve the idea this week.
Both of the bank's leaders have secured a pool of banks to guarantee the rights issues and would like to carry it out quickly to remove uncertainty that could make fundraising harder.
But MPS's largest shareholder, a cash strapped not-for-profit foundation led by Antonella Mansi, who was recently appointed head of the Monte dei Paschi foundation, is determined to block the cash call until mid-2014, to sell the foundation's 33.5% stake in the bank.
The matter is further complicated by the fact that the Monte dei Paschi foundation is based in the Tuscan city of Siena and has connections to local politicians that are also determined to delay the cash call demanded by Profumo.
Profumo who joined MPS in April 2012 may decide to quit if the foundation publicly defies him with a no-confidence vote, according to Reuters.
A shareholder meeting due on Friday 27 December had to be reconvened for Saturday 28 December as only 49.3% of investors showed up, below the required 50% plus one legal threshold.
On Saturday, the required number of shareholders will be lowered to one third, allowing the foundation to easily postpone the proposed capital increase.
The rights issue, plus a tough restructuring plan, are among the terms the European Commission imposed before giving its green light to the state aid for MPS.
The size of the capital increase is higher than the lender's stock market value of around €2bn and the operation is regarded as risky, as the bank is still loss-making.
Siena mayor Bruno Valentini, whose city council is the top stakeholder in the Monte dei Paschi foundation, said postponing the cash call might help keep the bank in Italian hands.
Saddled with roughly €340m of debt, the foundation is looking for a buyer for all or part of its stake.
It fears that a cash call next month would massively dilute its holding and leave it with virtually nothing to sell.
Profumo said last week that a delay would bring uncertainty and could force the bank to be nationalised.
Under the agreement with Brussels, if MPS cannot complete the capital increase by the end of 2014 the Italian Treasury would convert the bonds it bought from the bank into shares, that would effectively nationalise the bank.
The bank, which is axing 8,000 jobs and shutting 550 branches, added that a deferral in the cash call would add €120m of costs from interest payments on the state debt.
Morning Kev - It's hard to believe that the ECB et all would allow Monte Paschi to become nationalized - over several billion euros ? In the overall scheme of things , that is a relative trifle . And considering the " mark " it would leave , so to speak , hardly worth making the point. But we shall see !
Saw the ZH pice but didn't read it just yet ( so much was happening yesterday ! ) Probably will check it later today !
Prince Bandar predictive skills of terror in Russia seem to excellent - wonder if is still saying the Chechen fighters are still controlled by the Saudis ? And of course , how does Russia and Putin respond ?
Submitted by Tyler Durden on 12/28/2013 14:33 -0500
Good morning Fred,
ReplyDeleteI would think that Monte Paschi getting nationalized would leave quite the mark :).
I really enjoyed David Collum http://www.zerohedge.com/news/2013-12-28/david-collums-year-review-interview actually hadn't heard of him before.
Morning Kev - It's hard to believe that the ECB et all would allow Monte Paschi to become nationalized - over several billion euros ? In the overall scheme of things , that is a relative trifle . And considering the " mark " it would leave , so to speak , hardly worth making the point. But we shall see !
ReplyDeleteSaw the ZH pice but didn't read it just yet ( so much was happening yesterday ! ) Probably will check it later today !
Prince Bandar predictive skills of terror in Russia seem to excellent - wonder if is still saying the Chechen fighters are still controlled by the Saudis ? And of course , how does Russia and Putin respond ?