Italian fund undertakes first rescue at Popolare Vicenza
Italy’s government-orchestrated €4.25bn bank bailout fund Atlante has undertaken its first rescue mission after the flop of a closely watched €1.75bn capital call at its 10th largest bank, regional lender Popolare di Vicenza.
Privately backed fund Atlante, named after the Titan who held up the sky, was rushed into existence 10 days ago as a backstop facility to quell contagion to Italy’s banks should the capital call demanded by European Central Bank supervisors at Popolare Vicenza fail.
While small in relative value, the cash call at Popolare Vicenza had come to be seen as barometer of investor sentiment towards Italian banks. The sector has lost about 40 per cent of its value so far this year amid concerns about its backlog of €360bn of bad loans, of which €200bn are to borrowers deemed insolvent.
The close of the Vicenza capital call came as the government of Matteo Renzi on Friday took its latest step to shore up the banking sector, passing a decree aimed at speeding up repossessions. Bankers said it should help create a market for Italy’s €83bn of non-performing loans that are not already written down by its banks.
At the close of the capital call, Atlante ended up holding more than 90 per cent of the new shares at a price of 10 cents a share, Popolare Vicenza said in a statement on Sunday.
The rest of the capital call was bought by financial institutions active in Italy amid almost zero interest from foreign investors. Mediobanca, the Milanese investment bank, is the second-largest shareholder with a 5 per cent stake.
UniCredit did not subscribe, the statement said. Italy’s largest bank by assets had fermented fears of contagion by underwriting the Popolare Vicenza cash call, despite its own laggard capital position.
“Thank God for Atlante,” said one senior banker on the deal whose institution had backed the rescue, reflecting the widespread view in Italy that a failure of the capital raising without the fund as a backstop could have resulted in “bail in” of Popolare Vicenza or a capital call by UniCredit. That could have set off panic among investors and depositors.
The creation of Atlante raised questions about UniCredit’s governance procedures and how top management could have approved the risky underwriting of Popolare Vicenza when it ultimately proved unable to backstop it, said bankers.
Analysts and rating agencies said Atlante had averted contagion in the short term but argued it extended the risky interconnectedness of the Italian system as stronger banks support weaker ones.
Having raised fewer funds than the €6bn initially hoped for, Atlante also had a limited scope to cope with its second aim to help buy securitised tranches of bad loans.
Under the rules of Atlante’s creation, it will now restructure Vicenza and seek to sell it, potentially as a takeover target to a larger Italian lender. A mooted stock market listing was in doubt because of the weak market take up, said bankers.
Atlante was expected to intervene again at a €1bn capital call at another regional lender Veneto Banca in June.