Earthquake in the banking risk game Italian. There ECB gave a negative opinion on the application of the Danish compromise to the takeover bid launched by Bpm bank su Anima through its subsidiary Banco Bpm Vita. This is just an interpretation, given that the final word belongs to the Eba (European Banking Authority), but today it seems difficult to think that the latter could go in a different direction than that undertaken by the Central Bank. The reaction of the Stock Exchange was immediate, with the Banco Bpm title collapses at the bottom of the Ftse Mib with a loss of almost 5%, Unicredit which instead gives up 0,5% and Anima which marks -0,14%. The opinion expressed by the ECB, in fact, if confirmed by the EBA, will not only make the acquisition of Anima more expensive, but could push Unicredit to withdraw the takeover bid of over 10 billion launched on Banco Bpm and to concentrate its attention on generals.
Banco Bpm: ECB says no to Danish Compromise on Anima
Banco Bpm has received "a communication from the ECB, with which the supervisory body has brought its own decision to the bank's attention conservative view on the prudential treatment of the acquisition of Anima, to which, in its opinion, the so-called Danish Compromise would not apply", Piazza Meda confirmed through a note.
Secondo Radiocor, The ECB's No would be based on the CRR, that is, on the EU regulation on capital requirements under Basel 3, which for Banco Bpm should be applied in one way and for Frankfurt in another. Mf explains that, from Frankfurt's point of view, "when a group acquires an asset management company, the participation must be consolidated and the goodwill must be deducted from the capital, thus without benefit of the Danish Compromise". In essence, according to the supervisors, the patrimonial advantage applies to insurance companies, ma not to that of asset management.
Banco Bpm: “The decision is up to the Eba”
“The ECB's position does not constitute a 'decision'” and “leaves EBA assessments are unaffected, involved by the ECB itself, as the competent authority in order to definitively express its opinion on the issue", underlines Piazza Meda in a note. The experts underline however that It is unlikely that the EBA will express itself differently compared to the European Central Bank.
In this regard, the bank led by Giuseppe Castagna "recalls having specific question submitted to EBA aimed at confirming the applicability, to the specific case of the purchase of Anima, of the favorable position previously expressed by the same authority in response to a previous request for an opinion, formulated with reference to another operation". "Pending the official pronouncement by the EBA, the discussions continue with the ECB on this matter", concludes the institute, which could also decide to appeal.
The consequences of the No to the Danish Compromise
For Banco Bpm this is a real cold shower. Although after the vote of the assembly of last February 28, the application of the Danish Compromise is no longer a binding condition and therefore from a formal point of view the offer on Anima can go on regardless, from a practical point of view the operation will become much more expensive from the point of view of capital consumption.
Banco Bpm tries to reassure anyway the market: as for "the potential effects of the failure to apply the Danish Compromise that would result from a possible unfavourable ruling by the EBA", Piazza Meda underlines that "the 2024-27 strategic plan has taken this possibility into consideration, which has been reflected in a worst case scenario in which the Cet1 ratio remains above 13% (compared to 14,4% in the baseline scenario of the Danish Compromise) and the overall distribution shareholders is targeted at 6 billion euros – 50% higher than the targets of the previous plan – equivalent to one euro per share on an annual basis, to which an additional one billion euros would be added in the baseline scenario of application of the Danish Compromise”. The institute therefore confirms the plan targets already announced to the market.
In the same note, the Bank also communicates that tomorrow, Thursday March 27, the board of directors will meet to discuss updates on the Anima takeover bid, also with reference to the voluntary conditions of effectiveness attached to the offer as well as the progress of adhesions. "With regard to the latter - explains the institute - the bank recalls that, as a result of the adhesions collected so far, and taking into account the shares already subject to the adhesion commitment by Poste Italiane, as of March 25, 47,24% of the share capital of Anima, and therefore it was exceeded the minimum threshold of 45% + one action expected for the takeover bid: therefore, the 50% overcoming of the SGR is close”.
Will Unicredit withdraw its offer on Banco Bpm?
In this context, it is also necessary to consider Unicredit's possible reaction. Again on Thursday 27 March, Piazza Gae Aulenti will gather the shareholders to vote on the capital increase preparatory to the takeover bid on Banco Bpm, but several times in the past weeks the Bank's CEO, Andrea Orcel, had feared the possibility of withdrawing the offer launched on Piazza Meda in the event of failure to apply the Danish Compromise, with a parallel relaunch of the price of Anima (also established on February 28). According to Unicredit, in fact, it is not clear what "mitigation actions" Banco Bpm could implement to keep the Cet1 above 13%, while also maintaining a payout equal to "80% of net profit".
A few days ago, Orcel had also explained that “with the Danish Compromise the “Anima” transaction has a return on investment of over 15% without consuming much capital, but without the Danish Compromise the return on investment is 11% and consumes billions of capital,” Orcel explained. In the second case, “what we would buy would be much less capitalized than previously thought” and therefore “if it happens it is not a positive element, but a negative one”. Without the Danish Compromise, Orcel noted, there would be “a significant dilution of the return on investment”. Words that many have interpreted as a way of to put hands forward in view of a possible withdrawal.
The effects of the No reach as far as Generali
Unicredit is not commenting for the moment, but the market is starting to believe in the possible withdrawal of the offer. On the stock exchange, the exchange between Banco Bpm and Unicredit has already risen to 0,179 against the 0,175 proposed by the bank led by Andrea Orcel for the merger. In practice, the stock market values are almost aligned with the exchange rate of the takeover bid, while in the past weeks they showed a significant gap.
What is certain is that the ECB's opinion could represent a tincorrect for the entire banking risk Italian. If Unicredit decides to take a step back on Banco Bpm, Orcel could decide to focus on another heavy game. That of General, of which Piazza Gae Aulenti owns 5,2%, a decisive share in view of the Lion's board of directors scheduled for April 24.
