The Palio del Monte Paschi is anything but the finish line. The bank, which released the accounts yesterday, closed the second quarter with a higher red than expected, 178,9 million against 278 million a year ago and in any case more than double the 71,5 million expected by analysts . This is the ninth consecutive quarter of losses. A result that thus sinks the semester to a loss of 353 million euros, against a consensus estimate of -279 million. Yesterday the MPS share lost 3,62% on the stock exchange to 1,144 euros. At the opening today, the shares fail to make a price, with a theoretical fall of 9%.
"The restructuring of the balance sheet has been completed", commented the CEO Fabrizio Viola during the presentation of the accounts to the analysts, noting that thanks to the 5 billion capital increase the bank has become "now very solid". But he admitted, “We are committed and focused that next quarter will be driven by profitability restructuring. We have a lot to do and the work must be increased after the news coming from the macroeconomic scenario”. The freezing of the Italian GDP hasn't helped at all. “When we made the plan – Viola admitted again in the long conference call with the analysts – we thought we had been conservative. Unfortunately the reality is worse as the GDP data has shown us”.
In the six months, the intermediation margin fell by 4,7% to 1.843 million and the interest margin by 10,4% to 972 million. Fees climbed 6% to $871 million. The net operating result was negative by approximately 605 million euro (it was negative by 294,2 million euro at the end of June 2013).
The group's results were affected by the interest on the Monti bonds, the 196 million in interest expense recognized to the Ministry of the Economy for state aid (in any case, this is the last disbursement: at the beginning of July, 3 of the 4 billion subscribed by the Mef). But above all the adjustments to credits requested by the ECB due to the Asset quality review, around 255 million. In addition to the provisions made on some positions of significant amounts, the Bank's press release in fact notes that the revision of the loss estimates for some positions classified as bad loans carried out by the bank in the period, also for the purposes of the ECB's Asset quality review, had an impact.
In the second quarter alone, this is an increase of around 255 million (+53,5%), which brought adjustments to non-performing loans at the end of the half-year to over one billion euro, to 1,208 billion, with an increase of around 179 million euro compared to the first half of the previous year (+17,4%). In the absence of non-recurring results, it should thus be emphasized that the "normalised" result would be in balance. However, the CFO Mingrone recalled some significant dossiers that required provisions, such as Alitalia, Sorgenia and Siena Calcio.
However, the CEO in the conference call reassured that after the capital increase the bank is in a "good position especially in view of the results of the ECB's comprehensive assessment which we will know in October". The Cet1 capital ratio is 13,5% and therefore, as can be read in the presentation slides of the bank's accounts, above the average of European banks (10,9%)
In the meantime, the exposure to the ECB was reduced to 18 billion euros in August, thanks to the repayment of 10 billion euros of the Ltro, and will be fully repaid by 2015. On the front of the new Ltro launched by Draghi, i.e. the loans at subsidized rates but this time linked to the disbursement of credit by the institutions, MPS "can ask for up to 6 billion euros", explained Viola. The amount that can be requested is in fact for all banks equal to 7% of the loans of the single institution.
However, these days it is not enough to have money. You have to find customers. If the bank's top management confirmed their interest in TLTROs, they also added in a conference call that it is necessary “to be able to find customers to lend to and therefore there is the question of what the macroeconomic scenario will be like. We will therefore have to see how much the Tltro opportunity can be exploited”.
Among the positive aspects of the bank's restructuring work is the work on costs. The bank has already achieved its cost reduction target set for 2017 and has brought forward the closure of a further 150 branches to the first part of 2015 (in addition to the 400 branches in 2013). The agreement with the unions for 1.334 exits has already been defined. Yesterday's early morning the trade union debate started in July (a trade union table reassembled after a year) was successful.
The Bank signed an agreement with all the trade union organizations on the activation of the solidarity fund for 2014, with the aim of reducing the workforce by 1334 units. Which will concern the employees of Banca Mps, Consum.it, Mps Capital Services Banca per le Imprese, and Mps Leasing & Factoring, belonging to the Professional Areas and Middle Managers who will accrue the right to pension benefits after the end of October 2014 and by 30 December 2019.
The de-risking of the AFS portfolio continues, with Italian government bonds standing at around €19,2 billion compared to €22,4 billion a year ago. Mps then obtained the authorization for the launch of the online bank Widiva from the fourth quarter of the year.
