From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: 12/05/16 02:43:14
Subject: FT : Monte dei Paschi rescue thrown into doubt
Monte dei Paschi rescue thrown into doubtBank’s €5bn recapitalisation could fall victim to referendum resultA last-gasp rescue for Monte dei Paschi di Siena, the world’s oldest surviving bank, has been thrown into doubt after reformist prime minister Matteo Renzi decisively lost a referendum on constitutional reform on Sunday.MPS and advisers JPMorgan and Mediobanca will meet as early as Monday morning to decide whether to pull a plan to go ahead with a €5bn recapitalisation, according to people informed of the plan.Senior bankers will decide whether to pursue their underwriting commitments or exercise their right to drop the transaction due to adverse market conditions, these people said. In the event the banks drop the capital plan, the Italian state is expected to nationalise the bank, say senior bankers.Mr Renzi, who came to power in February 2014 pledging to reform Italy’s sclerotic economy, lost the referendum with 60 per cent of votes for “no”, according to polls from SkyTG24 at midnight Central European Time. The 41-year-old former mayor of Florence who had spurred investment in Italy with his reformist agenda told a live TV address he would resign on Monday.Analysts had argued the market had already priced in a “no” vote but warned that if Mr Renzi lost by a bigger margin than anticipated — as seemed to be the case with a fifth of the votes counted — market volatility could follow the outcome.If MPS’s private recapitalisation plan fails, Italy is expected to undertake a precautionary recapitalisation of the bank to avoid it being wound down under new EU rules, say people informed of the plan.One big MPS investor said the extent of Mr Renzi’s loss was “a really bad result”. This person said they expected the private recapitalisation would be pulled and the Italian state would pump funds into the bank.A precautionary recapitalisation would involve burden sharing by junior bondholders but with indemnification for investors up to a maximum of €100,000, said three people.Officials and bankers want to head off the risk of a deposit flight from Monte Paschi which has seen its deposits falls by 10 per cent so far this year as concerns about its viability have mounted.Officials also want to prevent contagion from Monte dei Paschi hitting Italy’s wider banking sector which is already weighed down by €360n of soured loans, low profitability and more bank branches than pizzerias.High on the list of concerns is an expected €13bn capital hike at UniCredit which Italy’s biggest bank is due to announce on December 13 as part of a new business plan.Bankers say UniCredit is likely to find investors but they are more doubtful about the chances of several other midsized banks attracting more capital if investors are spooked in the aftermath of the vote.Italian banks including Genoa’s Carige, Popolare di Vicenza and Veneto Banca require at least €3bn in new capital, say bankers.
Friday Close : Dow -0.11% S&P+0.04% Nasdaq +0.09% Russell +0.03% Best Sectors : Utilities Worst Sector : Financials
In a high-turnout referendum, PM Renzi lost his bid for Senate reform with nearly 60% of the voters casting their ballots as NO; Renzi to tender his resignation to Italian president on Monday who will then announce plans for forming a new govt; Euro-skeptic party leader Grillo says his supporters are ready to take the reins. Euro falls as much as 1.5% in early Asian trade on the referendum results before paring declines to $1.0560's. Focus falls on Italian yields and banking sector. China Caixin Services PMI hits a 16-month high, beating consensus. Hong Kong PMI in contraction for 21st straight month, but the figure is the highest since early 2015. Nigeria Oil Min: Expect to maintain 1.9M bpd output
Nikkei -0.82% Hang Seng -0.70% CSI -1.67% Shanghai -1.24%
Eur$ 1,0554 CNY 6,8886 GBP 1.2688 JPY 113.48 RUB 63.98 CHF 1.0155 WTI 51.11% -1%
S&P -0.30% EuroStoxx-1.12% Dax -0.85% SMI -0.72%
Macro :
- Caixin China Nov. Services PMI 53.1 vs 52.4 in Oct.
- Nikkei Japan Nov. Composite PMI 52 vs 51.3 in Oct.
- US banks face clash over EU regulations - FT
- Italy Court Freezes Part of Reform Law for Cooperative Banks
- Peru May Pay Up to $1.4b If Odebrecht Contract Scrapped: Reuters
- Swiss Minister Sees Companies Leaving If Tax Plan Rejected: T-A
- Italian Regulator Requires New Tender Offer for Alerion: Sole
- Japanese Govt Set to Impose Home-Sharing Limit: Nikkei
- Trump: 35% Tax to Be Levied on Imports From Cos. Leaving U.S.
- Mergermarket Said to Have Received Takeover Approach: S. Times
Keep an eye on :
- AIR FP : U.S. Navy Aims to Buy More Boeing F/A-18E/F Super Hornets: Rtrs
- AAL LN : Anglo Convinces Shareholder to Drop Spinoff Call: S.Telegraph
- AMUN FP : UniCredit Said to Agree to Sell Pioneer to Amundi for EU3b: FT
- AZN LN : AstraZeneca to Move U.K. Jobs to Poland, Costa Rica: Guardian
- BMPS IM : Qatar Set to Meet With Paschi on Dec. 5 After Referendum: Sole
- BMPS IM : Monte Paschi, Advisers to Meet Soon as Monday on Rescue Plan: FT
- BRBY LN : Burberry Said to Have Rejected Approaches From Coach: FT (Yday)
- CABK SM : Caixa Geral Conversion of CoCos to Take Place in 2016: Expresso
- CBK GY : Commerzbank’s Zielke Tells FAS Banks Will Disappear From Germany
- CSGN VX : Credit Suisse to Cut as Many as 1,300 Swiss Jobs, SamS Reports
- DBK GY : Deutsche Bank ETF Business Down EU4.5b in Jan-Oct: Handelsblatt
- DBK GY : Deutsche Bank to Pay $60m Fine for Gold-Price Manipulation: FAZ
- DB1 GY : Deutsche Boerse Sees Hesse Oversight Role After Merger: Reuters
- EDF FP : EDF Agreed Deal Terms With EPH, IFM in Polish Assets Sale: Rp.pl
- ENI IM : Eni Congo Oil Platform Fire Kills 1, Injures Five: Reuters
- EMG LN : Man GLG Asia Hedge Fund Managers Walsh and Vidale Said to Leave
- NG/ LN : National Grid to Select Gas Pipeline Bidder: S.Telegraph
- NOVN VX : Novartis Says SEG101 Met Primary Endpoint in Phase 2 Study
- NOVN VX : Novartis CEO Rules out Counter Bid for Actelion: SonntagsBlick http://bit.ly/2h2leKz
- RMG LN : Royal Mail Seeks Private Co. to Run Public Pension: S.Telegraph
- RDSA NA : Royal Dutch Shell receives bid approach from Macquarie for 45% stake in Corrib gas field - The Times
- SAN FP : Sanofi to Invest $80m in JHL Shares at NT$90/Shr in Alliance
- SAP GY : SAP’s Mucic Says Would Prioritize Small-Scale Acquisitions: BZ
- STL NO : *AKZO NOBEL CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
- SCMN VX : Swisscom Mobile Mkt Share ‘Not Ideal,’ Swiss Regulator: SoZ
- VMED LN : Virgin Media CEO downplays prospects of parent company Liberty Global bidding for ITV - Telegraph
- VOW3 GY : Volkswagen Financial Services Profit to Pass EU2 Billion: BZ
>>> Up
*BASF Raised to Buy at BofAML, PT EU97
*BHP BILLITON RAISED TO NEUTRAL VS SELL AT CITI
*Covestro Raised to Buy at BofAML, PT EU70
*Eni Raised to Equal-Weight at Morgan Stanley, PT EU13.40
*Finmeccanica Raised to Buy at Deutsche Bank, PT EU14
*Halma Raised to Buy at HSBC, PT GBP11
*Lanxess Raised to Buy at BofAML, PT EU70
*Polypipe Group Raised to Buy at Jefferies, PT 350p
*RIO TINTO RAISED TO NEUTRAL VS SELL AT CITI
*Rotork Raised to Hold at HSBC, PT GBP2.25
>>> Down
*AKZO NOBEL CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
*Evonik Cut to Neutral at BofAML, PT EU28
*Evraz Cut to Sell at Goldman, PT 200p
*Grafton Cut to Hold at Jefferies, PT 590p
*Tullett Prebon Cut to Hold at HSBC, PT GBP4.80
*Vossloh Cut to Hold at HSBC, PT EU58
>>> PT Change
>>> Initiation
*Natixis Rated New Neutral at UBS, PT EU4.40
>>> Call
>> Sector
*METALS & MINING SECTOR VIEW RAISED TO BULLISH AT CITI
Referendum Rejection
Turning down the constitutional reform means that political volatility will rise, the fiscal path will stay shaky and growth low. But a forthcoming electoral law diffusing power, rather than concentrating it, lowers the probability that the Five Star Movement wins the next election.
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Asia Mid-Session Market Update: PM Renzi to resign after NO victory in Italian referendum; New Zealand PM Key unexpectedly steps down
***Friday US markets on close: Dow -0.1%, S&P500 flat, Nasdaq +0.1%***
- At the close: VIX 14.1 (+0.1pts); Treasuries: 2-yr 1.08% (-2bps), 10-yr 2.39% (-5bps), 30-yr 3.06% (-3bps)
- Best Sector in S&P500: Utilities
- Worst Sector in S&P500: Financials
***Politics***
- (IT) Italy referendum early exit polls shows "no" vote ahead on PM Renzi's proposed Constitutional reforms
- (IT) Italy PM Renzi: My govt ends here (resigns as promised); Turnout was higher than anyone expected; Italian people have spoken
- (IT) Italy's 5-Star party leader Grillo: Need to take immediate early vote; 5-star is ready to form a new govt - press
- (NZ) New Zealand PM Key: To stand down as PM and will not stand for re-election in 2017; National Party would win under Deputy PM Bill English
- (AT) Austria Presidential election: Center-left candidate Alexander Van der Bellen defeats far-right Norbert Hofer by 53.3% to 46.7% margin
***Asia Session Notable Observations, Speakers and Press***
- In a high-turnout referendum, PM Renzi lost his bid for Senate reform with nearly 60% of the voters casting their ballots as NO; Renzi to tender his resignation to Italian president on Monday who will then announce plans for forming a new govt; Euro-skeptic party leader Grillo says his supporters are ready to take the reins.
- Euro falls as much as 1.5% in early Asian trade on the referendum results before paring declines to $1.0560's. Focus falls on Italian yields and banking sector.
- Austria avoids becoming the first Eurozone nation to vote in a far-right candidate.
- NZD falls as much as 70pips to 0.7070 after surprise decision by PM Key to end his tenure after 8 years of govt; Fin Min English indicates he will consider standing for Key, who also expects his party to maintain control; Moody's notes the change in leadership has no bearing on ratings.
- China Caixin Services PMI hits a 16-month high, beating consensus; Economists notes the price inflation rather than structural improvement is behind the recent recovery in economy, warning 2017 may yet face a significant downward pressure.
- Hong Kong PMI in contraction for 21st straight month, but the figure is the highest since early 2015; Staffing levels rise for the first time in since Mar 2014 and rate of input cost inflation also accelerated.
- US-China relations at risk of being strained after Pres-elect Trump accepts congratulatory phone call from president of Taiwan; When criticized for the move as a break from decades of US "one-China" foreign policy, Trump tweets about China currency devaluation and military build-up in South China Sea.
Energy:
- (NG) Nigeria Oil Min: Expect to maintain 1.9M bpd output
China:
- (TW) China "unswervingly" opposes Taiwan independence - official Xinhua news agency ( comments come after it was reported that the Taiwanese President spoke with Pres-elect Trump this week)
- (CN) US President elect Trump tweets: "Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete)"
- (CN) PBOC Deputy Gov Fan Yifei: many companies have to take new loans to take new loans to pay down old debt; hard for private sector to get loans - Caixin
Japan:
- (JP) Japan PM Abe: Expect BOJ to use appropriate and bold policy to reach price goal
- (JP) Japan Chief Cabinet Sec Suga: To continue monitoring political situation in Italy - press
- (JP) Japan Vice Fin Min of International Affairs (currency chief) Asakawa: Brexit vote created a new European context; BOJ alone cannot overcome deflationary mindset
Australia:
- (AU) CitiGroup: Expect RBA Gov Lowe to "chill-out" for at least a few months over the Australian summer on further policy moves; Lowers AUD/USD forecast for 2017 to $0.70 from $0.78 and for 2018 to $0.71 from $0.79
- Westpac to increase interest rates on new and existing mortgage loans beginning Dec 16 - AFR
- NAB.AU: Raises variable rate on investor mortgages by 0.15%
***Asian Equity Markets/Futures (00:00ET)***
- Nikkei225 -1.0%, S&P/ASX -0.8%, Kospi -0.2%, Shanghai Composite -1.4%, Hang Seng -0.3%
- Equity Futures: S&P500 -0.3%, Dax -0.7%, FTSE100 -0.2%
***FX ranges/Commodities/Futures/Fixed Income (00:00ET):***
- EUR 1.0505-1.0660; JPY 112.85-113.85; AUD 0.7410-0.7455; NZD 0.7070-0.7140
- Feb gold flat at $1,178/oz, Jan crude oil -0.7% at $51.30/brl, Mar copper +1.3% at $2.66/lb
- (KR) Bank of Korea (BOK) sells KRW700B in 3-month bonds at 1.4%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8870 V 6.8794 PRIOR
***Key economic data:***
- (CN) CHINA OCT CAIXIN CHINA SERVICES PMI: 53.1 (16-month high) V 52.4 PRIOR; COMPOSITE PMI: 52.9 V 52.9 PRIOR
- (HK) HONG KONG NOV COMPOSITE PMI: 49.5 V 48.2 PRIOR; highest since Mar 2015; 21st consecutive month of contraction
- (JP) JAPAN NOV SERVICES PMI: 51.8 V 50.5 PRIOR; COMPOSITE PMI: 52.0 V 51.3 PRIOR
- (SG) SINGAPORE NOV PMI COMPOSITE: 52.8 V 50.5 PRIOR (7th consecutive expansion)
- (IN) INDIA NOV PMI SERVICES: 46.7 V 54.5 PRIOR (1st contraction reading in 17 months and lowest since Dec 2013)
- (AU) AUSTRALIA Q3 COMPANY OPERATING PROFIT Q/Q: 1.0% V 3.0%E; INVENTORIES Q/Q: 0.8% V 0.3%E
- (AU) AUSTRALIA NOV ANZ JOB ADVERTISEMENTS M/M: 1.7% V 1.0% PRIOR (3-month high)
- (AU) AUSTRALIA NOV MELBOURNE INSTITUTE INFLATION M/M: 0.1% V 0.2% PRIOR; Y/Y: 1.5% V 1.5% PRIOR
- (AU) AUSTRALIA NOV AIG PERF OF SERVICES INDEX: 51.1 V 50.5 PRIOR; 2nd straight expansion
- (NZ) NEW ZEALAND NOV ANZ COMMODITY PRICE M/M: 2.7% v 0.7% PRIOR
- (UK) NOV BRC SHOP PRICE INDEX Y/Y: -1.7% V -1.7% PRIOR (43rd straight month of decline)
***Asia movers***
- DUE.AU: Hong Kong's Cheung Kong Infrastructure makes an unsolicited conditional A$3.00/shr cash offer, A$7.5B offer; +16.6%
- Renesas 6723.JP: Goldman Sachs Raised 6723.JP to Buy from Neutral; +6.4%
- Lonking Holdings 3339.HK: Issues positive H2 profit alert; +5.0%
- G8 Education GEM.AU: Guides FY16 EBIT A$158-162M; +2.4%
- Fantasia Holdings 1777.HK: Reports Nov Sales CNY751M v CNY858M m/m; YTD CNY11.1B; +1.9%
- CitiGroup Raised Fortescue FMG.AU +1.8%, BHP +0.6%, Rio Tinto +1.0%
- Paradise Entertainment 1180.HK: Issues FY16 profit warning; -1.4%
- Woodside Petroleum WPL.AU: Shell said to be interested in selling its A$3.0B stake in Woodside following rally in oil - Australian; -1.9%
- China Vanke 2202.HK: Nomura Cuts 2202.HK to Neutral from Buy; -7.9%
Monte dei Paschi rescue thrown into doubt
Bank’s €5bn recapitalisation could fall victim to referendum result
A last-gasp rescue for Monte dei Paschi di Siena, the world’s oldest surviving bank, has been thrown into doubt after reformist prime minister Matteo Renzi decisively lost a referendum on constitutional reform on Sunday.
MPS and advisers JPMorgan and Mediobanca will meet as early as Monday morning to decide whether to pull a plan to go ahead with a €5bn recapitalisation, according to people informed of the plan.
Senior bankers will decide whether to pursue their underwriting commitments or exercise their right to drop the transaction due to adverse market conditions, these people said. In the event the banks drop the capital plan, the Italian state is expected to nationalise the bank, say senior bankers.
Mr Renzi, who came to power in February 2014 pledging to reform Italy’s sclerotic economy, lost the referendum with 60 per cent of votes for “no”, according to polls from SkyTG24 at midnight Central European Time. The 41-year-old former mayor of Florence who had spurred investment in Italy with his reformist agenda told a live TV address he would resign on Monday.
Analysts had argued the market had already priced in a “no” vote but warned that if Mr Renzi lost by a bigger margin than anticipated — as seemed to be the case with a fifth of the votes counted — market volatility could follow the outcome.
If MPS’s private recapitalisation plan fails, Italy is expected to undertake a precautionary recapitalisation of the bank to avoid it being wound down under new EU rules, say people informed of the plan.
One big MPS investor said the extent of Mr Renzi’s loss was “a really bad result”. This person said they expected the private recapitalisation would be pulled and the Italian state would pump funds into the bank.
A precautionary recapitalisation would involve burden sharing by junior bondholders but with indemnification for investors up to a maximum of €100,000, said three people.
Officials and bankers want to head off the risk of a deposit flight from Monte Paschi which has seen its deposits falls by 10 per cent so far this year as concerns about its viability have mounted.
Officials also want to prevent contagion from Monte dei Paschi hitting Italy’s wider banking sector which is already weighed down by €360n of soured loans, low profitability and more bank branches than pizzerias.
High on the list of concerns is an expected €13bn capital hike at UniCredit which Italy’s biggest bank is due to announce on December 13 as part of a new business plan.
Bankers say UniCredit is likely to find investors but they are more doubtful about the chances of several other midsized banks attracting more capital if investors are spooked in the aftermath of the vote.
Italian banks including Genoa’s Carige, Popolare di Vicenza and Veneto Banca require at least €3bn in new capital, say bankers.
Renzi resigns after referendum defeat
Italian reform plans fall to heavy defeat triggering new crisis
Matteo Renzi is set to resign after suffering a heavy defeat in a referendum on his flagship constitutional reforms, a result that plunges Italy into political crisis and raises fears of turmoil in its banking system.
Italians rejected the constitutional changes — designed to ease gridlock in the country’s political system — by a wide margin of 59-41 per cent, according to early returns, in a vote marked by a high turnout of nearly 69 per cent.
In an emotional press conference at the Palazzo Chigi early on Monday, Mr Renzi said the outcome had been “extraordinarily clear”.
“We gave Italians a chance to change. It was simple and clear, but we didn’t make it,” he said. Mr Renzi said that he should bear the entire responsibility of the loss, and announced that he would submit his resignation to Italy’s president, Sergio Mattarella, on Monday afternoon.
The political instability triggered by Mr Renzi’s defeat could jeopardise plans by Monte dei Paschi di Siena, Italy’s struggling third-largest bank, to raise up to €5bn by the end of the year. The bank and its advisers are expected to meet on Monday morning to decide whether to go ahead with the plan.
Renzi may be on way out, but biggest danger could be to banks
And the euro sank to 20-months lows in Asia early on Monday, falling as low as $1.0505.
Although Italy’s result is a blow to the EU establishment, there had been some cheer from Austria earlier in the evening when a left-leaning environmentalist beat the far-right candidate to the presidency.
The Italian vote had been seen as yet another litmus test for the strength of populism in Europe.
While Mr Renzi comes from the moderate centre-left, the opposition to his reforms was led by the anti-establishment Five-Star Movement, led by comedian Beppe Grillo, Matteo Salvini, the leader of the anti-immigrant Northern League, and Silvio Berlusconi, the media tycoon and former prime minister.
The “no” coalition was not exclusively composed of populists, however. It also included other former Italian prime ministers such as Mario Monti and Massimo d’Alema, as well as an array of senior jurists who believed the reforms were poorly crafted and concentrated too much power in the hands of the executive branch.
Marine Le Pen, the leader of the far right National Front in France, cheered Mr Renzi’s defeat, saying the “thirst of freedom” coming from Italy needed to be listened to.
We gave Italians a chance to change. It was simple and clear, but we didn’t make it
Matteo Renzi
Mr Renzi’s resignation seals the political downfall of the 41-year-old former mayor of Florence, who took office in February 2014 with a mission to reform Italy and will now see his tenure come to an abrupt end.
Earlier this year, Mr Renzi’s “yes” camp had been widely expected to prevail in the referendum, but a combination of factors — including the weak economy, the migration crisis and problems in the banking industry — dented his popularity. Moreover, Mr Renzi chose to personalise the vote early in the campaign by threatening to resign if he lost, a move that galvanised and united the opposition against him.
Mr Renzi had tried throughout the campaign to channel the anti-establishment mood sweeping Europe in his favour, arguing that a vote to streamline Italy’s political system represented a much-needed change for the country. But his pitch was met with derision from the opposition, which dismissed him as a power-hungry establishment politician who was excessively close to the European elite and global finance.
Opposition 5-Star Movement leader Beppe Grillo arrives at a polling station to vote © AP
“I don't like the Renzi government, I don't like what they are doing,” said Alfredo, a 68-year-old self-described communist voter at a polling booth on the Via Pannonia in Rome, near the ancient Baths of Caracalla. “I don’t like the way Italy is subordinated to Europe. I am in favour of Europe but I want a Europe of the people,” he added after casting a “no” vote.
Livia Astolfi, a 44-year-old tourist guide, added: “I voted ‘no’ because I don't like the way the reform has been written. The constitution is not carved in stone and it can be changed, but that’s not the way of doing it. I think Italy needs a better reform, not the one they asked us to vote. I don’t trust the current government and its policies and I don’t want to choose the lesser of two evils.”
Some, however, hoped he would win. “I am going to vote ‘yes’ because we [Italians] are bogged down and Renzi is trying to drag us out,” said Francesca Romana Freni, a 34-year-old biologist.
After accepting Mr Renzi’s resignation, Mr Mattarella will launch a round of talks on the formation of a new government.
Any new government would either be led by Mr Renzi himself, or another senior member of his centre-left Democratic party — with Pier Carlo Padoan, the finance minister, Pietro Grasso, the president of the Senate, Graziano Delrio, the transport minister, or Dario Franceschini, the culture minister, among the most-frequently mentioned candidates.
They would probably have a narrow mandate to carry the country to the next elections due in early 2018. But if there is no agreement on a new government, the country would face the prospect of snap elections.
Mr Renzi’s defeat also marks a big victory for the Five-Star Movement, which has been running neck and neck with the ruling Democratic party in most national polls this year and has been aiming to unseat the prime minister for most of his tenure. Mr Grillo, the Five Star leader, labelled Mr Renzi a “wounded sow” and a “serial killer” during the campaign, which became increasingly ill-tempered towards the end.
But while the referendum result will embolden the Five-Star Movement — which has called for another referendum, this time on exiting the euro — it would still have to gain power in parliamentary elections in order to carry out its political programme. The result of Sunday’s vote could also boost the stock of Matteo Salvini, the leader of the Northern League, in what has been a duel for primacy over the centre-right with Mr Berlusconi, who pushed for a “no” with less verve since his Forza Italia party includes more moderate voters.
As well as for Italy’s banks, the victory of the “no” camp will mark a huge disappointment for Italian business, whose top ranks almost unanimously pushed for a vote in favour of the reforms on the grounds that they would represent a big step towards the country’s modernisation. Confindustria, Italy’s main business group, and Coldiretti, the top agricultural lobby, were at the forefront of Mr Renzi’s campaign.
Italian exit polls deliver blow to Renzi
PM expected to speak to country after early indications reform plan
Matteo Renzi seems set to lose a referendum on his flagship constitutional reforms, according to exit polls released on Sunday night, a result that could lead to the Italian prime minister’s resignation.
Although exit polls have been unreliable in Italy in the past, they suggested a wide margin of defeat for the “yes’ camp championed by Mr Renzi, who designed the reforms to streamline the country’s political system. According to broadcaster Rai, the “no” camp won 58 to 54 per cent of the vote, while the “yes” camp garnered between 46 per cent and 42 per cent.
Mr Renzi is expected to speak at midnight local time, his spokesman said.
The Italian vote is seen as a litmus test for the strength of populism in Europe — and there are fears the outcome could plunge the country into political crisis and raise fears of turmoil in its banking system.
While Mr Renzi comes from the moderate centre-left, the opposition to his reforms was led by the anti-establishment Five Star Movement, led by comedian Beppe Grillo, Matteo Salvini, the leader of the anti-immigrant Northern League, and Silvio Berlusconi, the media tycoon and former prime minister.
The “no” coalition is not exclusively composed of populists, however. It also included other former Italian prime ministers such as Mario Monti and Massimo d’Alema, as well as an array of senior jurists who believed the reforms were poorly crafted and concentrated too much power in the hands of the executive branch.
A loss in Sunday’s referendum could seal the political downfall of the 41-year-old former mayor of Florence, who took office in February 2014 with a mission to reform Italy and will now see his tenure come to an abrupt end.
Earlier this year, Mr Renzi’s “yes” camp was widely expected to prevail in the referendum, but a combination of factors — including the weak economy, the migration crisis and problems in the banking industry — dented his popularity. Moreover, Mr Renzi chose to personalise the vote early in the campaign by threatening to resign if he lost, a move that galvanised and united the opposition against him.
Mr Renzi had tried throughout the campaign to channel the anti-establishment mood sweeping Europe in his favour, arguing that a vote to streamline Italy’s political system represented a much-needed change for the country. But his pitch was met with derision from the opposition, which dismissed him as a power-hungry establishment politician who was excessively close to the European elite and global finance.
“I don't like the Renzi government, I don't like what they are doing,” said Alfredo, a 68-year-old self-described communist voter at a polling booth on the Via Pannonia in Rome, near the ancient Baths of Caracalla. “I don't like the way Italy is subordinated to Europe. I am in favour of Europe but I want a Europe of the people,” he added after casting a “no” vote.
Livia Astolfi, a 44-year-old tourist guide, added: “I voted ‘no’ because I don't like the way the reform has been written. The Constitution is not carved in stone and it can be changed, but that's not the way of doing it. I think Italy needs a better reform, not the one they asked us to vote. I don’t trust the current government and its policies and I don’t want to choose the lesser of two evils."
Some, however, hoped he would win. “I am going to vote ‘yes’ because we [Italians] are bogged down and Renzi is trying to drag us out,” said Francesca Romana Freni, a 34-year-old biologist.
If Mr Renzi loses, many Italian political observers are expecting him to hand in his resignation to Sergio Mattarella, the Italian president, on Monday, triggering a round of talks on the formation of a new government.
Any new government would either be led by Mr Renzi himself, or another senior member of his centre-left Democratic party — with Pier Carlo Padoan, the finance minister, Pietro Grasso, the president of the Senate, Graziano Delrio, the transport minister, or Dario Franceschini, the culture minister, among the most-frequently mentioned candidates.
They would probably have a narrow mandate to carry the country to the next elections due in early 2018. But if there is no agreement on a new government, the country would face the prospect of snap elections.