Monte dei Paschi has released the 2017-2021 restructuring plan approved by Brussels. The plan includes the reduction of 600 branches and the sale of the two foreign banks of the group: the French Mps Banque and Mps Belgium. The managing director Marco said so Morelli in the presentation of the plan to the analysts. As far as personnel are concerned, MPS expects a reduction of 5.500 units by 2021 (of which 4.800 exits through the activation of the Solidarity Fund, 450 exits linked to the sale/closure of businesses, 750 exits deriving from the physiological turnover and approximately 500 new hires). Also expected disposal of 28,6 billion euro of gross non-performing loans (data as at 31 December 2016), of which 26,1 billion through a securitization structure and 2,5 billion, consisting of
unsecured positions of small amounts and leasing, through dedicated procedures.
As part of the securitization, the Junior and Mezanine bonds will be transferred to the Fondo Atlante ad a price equal to 21% of the gross value accountant: the deconsolidation of the non-performing portfolio is expected for the first half of 2018. The return to trading on the Stock Exchange should take place at the end of September, after the presentation of the prospectus to Consob but no dividends in sight: "One of the bans requested by the EU is the one on the distribution of divendi, as long as one remains in the state aid regime”, Morelli said.
Rocca Salimbeni indicates a return to profit from 2019 with an estimated net profit of 570 million. The number emerges from a table in the presentation to analysts. The net operating result for 2019 is indicated at 700 million. The set of renovations will bring a net profit of 1,2 billion by 2021 according to management forecasts. Roe at the end of the period is estimated at 10,7%.
It is therefore a historic day for the credit market. After the approval of the European Commission which accepted the precautionary recapitalization of Monte dei Paschi di Siena, the Treasury will be able to enter the capital by the end of this month, rising to around 70% of the Sienese bank at a total cost of 5,4 billion . In line with the "burden-sharing principle" envisaged by EU state aid legislation.
Marco Morelli he described the work of these months as that of an "emergency room: an emergency every five minutes". The CEO dedicated a few thoughts to the commitment and dedication shown by all the human resources of the group on the occasion of the presentation of the essential points of the restructuring plan: "Monte dei Paschi - added Morelli - will now be able to recover its place in the Italian retail banking market”. In the first three months of 2017, Morelli added, 5,5 billion in deposits were recovered.
The gross salary of the MPS CEO envisaged in the bank's restructuring plan is 466 thousand euros per year. Morelli has renounced any form of indemnity and bonus for the entire duration of the plan, and the situation will remain as it is until the European Union decides on the exit from the aid regime.
The CEO commented in this regard: “There will be 5 people with salary cut besides me” - This is a reduction of around 70% compared to the CEO's current salary. The plan also includes a cap on salaries: they cannot exceed 10 times the average employee.
Here is a summary of what will be the implications of what happened in the last few hours at Mps:
a) The group recapitalizes for a total of 8,1 billion. Of this figure, $4,3 billion falls on subordinated bondholders and shareholders, through the conversion of subordinated bonds into equity and dilution of existing shareholders.
b) The Mef will participate in the operation with 3,9 billion (net of the repayment of the retail bond holders without the compensations for 1,5 billion) entering the capital of MPS with the purchase of shares at a reduced price.
c) Mps sold some assets raising private capital for 536 million euro.
For the rest, the bank will focus on the retail banking and small business, also enhancing the contribution of the online channel Widiba, the subject of a digital relaunch plan of the group which will involve infrastructure investments. The other pillars will be the complete redesign of the distribution network, with the reduction of branches (from 2.000 in 2016 to approximately 1.400 in 2021), the reduction of 5.501 units (as already described) and a further 26% cut on administrative expenses.
From the point of view of capital strengthening, the group expects to achieve a CET1 ratio >14% and a ROE >10% in 2021.
The State will be able to remain a shareholder until the horizon of the plan to 2021, "but nothing rules out the possibility that the exit can be brought forward", said MPS president Alessandro Falciai. Minister Padoan spoke of the plan as “an extremely important element for the Italian bank and banking system and a further turning point after the agreement reached a week ago on the Veneto banks. It is a plan that gives certainties, a sustainable time horizon to the bank which will have a very important level of capital". According to the minister, "public money will not only be recovered but will be recovered with a premium".
(updated at 13.00, July 5, 2017)
