* Over next few days, the government is due to announce the incorporation of a new company to support Italian banks
* The initiative would provide capital to the sector, avoiding the bail in of some banks and improve investors’ confidence
* Banks should benefit from a new support whilst NPLs disposal may continue to remain a drag
- A new company to stabilise the sector. According to the press, (Sole 24 Ore, 9 April 2016) the government is planning to launch a new company aimed at:
1) supporting planned rights issues for the weaker domestic banks (private equity) and
2) investing in the NPLs disposals. The details are still unveiled but it seems that the Newco may launch two new funds that will be financed mostly by issuing debt.
The initial capital should reach EUR2-3bn, increasing up to EUR5bn
Italian institutions among the main shareholders. The Newco should be funded by private investors mainly, even though Cassa Depositi and Prestiti (CDP) may take a 20% stake injecting EUR1bn, whilst banking foundations could also participate for up to EUR500m, pension funds for an undisclosed amount and Italian banks for EUR1.5-2bn, we estimate. According to the Sole 24 Ore, Unicredito could inject EUR500m, Intesasanpaolo a higher amount and UBI a lower amount. No institutions should control more than 20% stake in order to avoid full consolidation of the Newco
in its own balance sheet.
EUR5bn programme enough to provide support to banks…. Details are still unclear, but we assume that the larger fund would have a EUR3.5bn liquidity to invest in supporting banks’ recapitalisation, corresponding to 65% of the four banks bailed in November. Veneto Banca and Banca Popolare di Vicenza are widely expected to rise EUR2.8bn over the next weeks but these operations have already been guaranteed from the two main Italian banks ISP and UCI. As we have no indication of other large capital needs in the sector, we believe that EUR3.5bn could
be adequate to support the sector short term.
… but not to support NPLs disposals. Gross NPLs in February hit EUR196bn. Regardless of considerations on the coverage and the collateral values (Italian banks, new financing structure to improve market price of NPLs, 19 February 2016) a new fund with EUR1.5bn liquidity would make no difference, albeit it may be helpful
to support specific situations to be valued on a bank by bank basis.