Banco BPM's Board of Directors met on 29 November and examined two important transactions that are part of the reorganization and derisking process undertaken by the Banco BPM Group since its inception, as part of the actions envisaged by the Strategic Plan and the subsequent additions to the derisking plan already communicated to the market. From the point of view of the reorganization of consumer credit, the two transactions envisage the signing of a Memorandum of Understanding ("MoU"), signed in the last few hours, binding with Crédit Agricole aimed at strengthening the partnership in the consumer credit sector in Italy , with a simultaneous positive effect of approximately 80 basis points on the Group's capital ratios in terms of derisking, the continuation of the ongoing negotiations for the implementation of an important transaction for the sale of non-performing loans which, based on the offers received from the selected consortia as potential investors, allows the Group to further accelerate the disposal plan for a nominal value of up to €7,8 billion, well above the €3,5 billion previously envisaged and with an impact on capital in any case lower than the benefits deriving from the reorganization of consumer credit.
Reorganization of the Consumer Credit sector
As regards the reorganization of the consumer credit sector, Banco BPM, Crédit Agricole Consumer Finance SA and Crédit Agricole have signed a binding Memorandum of Understanding ("MoU") aimed at strengthening the partnership in the consumer credit sector in Italy. The transaction will significantly strengthen the leadership and market shares of the investee company Agos Ducato SpA (“Agos”). The agreement envisages the acquisition of ProFamily SpA by Agos for a consideration of € 310 million, subject to the completion of a demerger operation of the non-captive assets of ProFamily SpA in favor of a company newly established which remains 100% controlled by Banco BPM. ProFamily SpA, as part of Agos, will have an exclusive distribution agreement for 15 years on the commercial network of the Banco BPM Group starting from the completion of the transaction.
As part of the transaction, Banco BPM will maintain the current stake in Agos of 39% (61% Credit Agricole). The transaction provides for the signing of certain agreements between Banco BPM, Crédit Agricole and Crédit Agricole Consumer Finance, which include the shareholders' agreement, the distribution and funding agreements which reconfirm the current partnership for the next 15 years. In the context of the renewal of the partnership, Banco BPM and Crédit Agricole have also agreed to explore the possible listing of Agos via an initial public offering (“IPO”) within the next 2 years. This transaction provides greater flexibility to both shareholders while confirming and guaranteeing their strong commitment to the future development of the company.
As part of the IPO, Banco BPM will have the option but not the obligation to reduce its stake in Agos. In this regard, Banco BPM obtained from Crédit Agricole a guaranteed put option for a shareholding equal to 10% of the capital of Agos at a price of € 150 million, exercisable in June 2021. This guarantee, to the extent that involves a reduction of the risk associated with the capital invested by Banco BPM in the investee Agos, will result in a consequent increase in Banco BPM's CET1 ratio. However, exercising the option is unlikely given the wide gap between the strike price of € 150 million and the intrinsic value of Agos, which is destined to further increase due to the expansion of the partnership to include the Pro Family captive business.
The overall pro-forma impact on Banco BPM's fully loaded CET1 ratio deriving both from the capital gain that will be recognized upon the sale of ProFamily and from the reduction of deductions from CET1 capital related to the stake held in Agos is estimated at 80 bp . These benefits will make it possible to deal with the overall effects on capital deriving from the ACE transaction, leaving the fully loaded Common Equity Tier 1 Ratio calculated "pro forma" at 30 September 2018 essentially unchanged, even in the hypothesis of a sale at the upper levels of the range. Nomura International acted as sole financial advisor for Banco BPM while Studio Gatti Pavesi Bianchi acted as legal advisor for the transaction. For Banco BPM, the sale of ProFamily − to be carried out after the demerger of the non-captive assets in favor of a newly established company − takes the form of a related party transaction pursuant to Consob Resolution no. 17221/10 (the "Consob RPT Regulation") and the related company regulations adopted by the Bank (the "Banco BPM Procedure", available on the website www.bancobpm.it, Governance section, Corporate Documents), as Agos SpA was considered, for the purposes of the legislation in question, a company in which Banco BPM exercises significant influence.
In this regard, it should be noted that - for the purposes of the aforementioned regulatory and company regulations - the transfer can be classified as a "minor material" transaction; however, since it is a transaction "with an associated company" and since there are no significant interests in Agos SpA of other related parties of Banco BPM, the conditions for the exemptions provided for by the Consob OPC Regulation and the Banco BPM Procedure have been applied, without prejudice to the obligation to provide information regarding the transaction in compliance with the applicable regulations.
"ACE" project
Following the previous communications to the market of 19 June 2018, 3 August 2018 and 7 November 2018 relating to the project for the sale of a non-performing portfolio ("ACE" project), we inform you that the Bank's Board of Directors has evaluated the offers received from the consortia selected as potential
investors: (A) Credito Fondiario and Elliott, (B) DoBank, Fortress and Spaxs, and (C) Prelios and Christofferson Robb & Company. The offers, in addition to the purchase of a bad loans portfolio of € 3,5 billion GBV initially envisaged by the Bank, include further options for the sale of a higher bad loans portfolio than initially forecast and the creation, in partnership between Banco BPM and the selected investor of a servicing platform. The binding offers received, which for now exclude the “lease portfolio” of €800
million, on which the due diligence is being finalised, allow the Bank as of now to be able to complete a higher transaction than initially envisaged, indicatively for a nominal amount up to € 7,8 billion, possibly exploiting the possibility of use the state guarantee for the securitization of non-performing loans pursuant to Law Decree no. 18/2016 (GACS).
Banco BPM's BoD therefore mandated the Chief Executive Officer to continue negotiating with the three potential investors on the best terms and conditions for a transaction that jointly includes the sale of a portfolio of non-performing loans, up to the total amount indicated above, and the creation of a servicing platform in partnership with the investor that will be selected. At the end of the negotiation, a Board of Directors will be convened to approve the transaction.
