These are decisive hours for the future of Mps. In the morning the supervisory body of the ECB has assessed the restructuring plan proposed by the institute. Based on information received from Frankfurt, in the afternoon the board of directors of the Sienese Bank will meet in extraordinary session to discuss two fundamental issues: the strengthening measures in view of the EBA stress tests at the end of July and the plan for the disposal by 2018 of another 10 billion bad loans, to be defined again by the end of the month at the explicit request of the Eurotower. Furthermore, at the end of July, the Bank will have to approve the accounts for the first half year. By then, the bailout plan will be officially defined, which should be divided into three steps.
1. THE DISPOSAL OF BAD LOANS
For the sale of the NPLs (JP Morgan, Mediobanca and Quaestio sgr are working on the maxi-securitisation), negotiations continue with the Atlante fund, which still has 1,7 billion on hand and seems to be struggling more than expected to raise new funds from the banks. It is likely that Atlante 2 will also come into play, a fund still managed by Quaestio sgr which could see the light of day in a short time with the participation of Sga and Cdp.
A crucial issue is the price at which the non-performing loans will be sold, which is still uncertain: it should be around 29-30% of the nominal value, well over the 17% paid to the four banks that ended up in resolution at the end of 2015. In any case, the The transaction will lead to further losses for the bank, which will almost certainly be forced to make a new capital increase of around 2-3 billion to cover the shortfall.
2. THE CAPITAL INCREASE
The market route would allow both the intervention of an investor and the creation of a safety belt by the main Italian banks. On this front, some foreign institutes are being probed for the establishment of a possible guarantee consortium.
Another possible solution is the guarantee of last resort by the state. According to sources in Brussels, Italy would have obtained the go-ahead for the derogation provided for in exceptional circumstances by the new rules on the bank resolution mechanism (BRRD directive), which allow public aid to solvent banks in the event that the slavish application of the bail put the stability of the financial system at risk. The agreement should be made public before the stress tests of July 29, so that the foreseeable rejection of MPS does not give rise to a new storm on the stock market.
It remains to be clarified whether the State will be able to use part of the 150 billion guarantees already granted by Brussels to Italy for this purpose, since these are resources that cannot be used to guarantee shares, but only convertible bonds.
3. THE “BURDEN SHARING”
However, the exemption granted by Brussels will not be a true panacea, because if the market does not fully cover the capital increase and the State is forced to intervene, the so-called "burden sharing" would take place. Translation: MPS subordinated bonds would be zeroed. To solve the problem, the plan is to get MPS or ultimately the state to repurchase these worthless securities. It is not yet clear whether this protective measure will only benefit retail savers (and possibly only those who have bought the securities on the basis of incomplete or incorrect information) or also institutional investors.
THE “INDUSTRIAL SOLUTION”
Furthermore, the market does not exclude that, at the end of this process, something could change in the MPS control structure. Meanwhile, Ubi Banca, after having denied its intention to take over the Sienese group, has also denied the rumors about its possible interest in the branches of the former Banca Antonveneta, an operation that would have allowed MPS to reduce the need for relief of difficult loans to approximately 5 billion, halving Atlante's commitment.
THE POSITION OF THE GOVERNMENT
As far as the Executive is concerned, Prime Minister Matteo Renzi has renounced the project for a MPS-saving decree that would have allowed the State or the CDP to enter the capital of the institute, a solution deemed unpopular. Palazzo Chigi prefers to focus on the market, as Pier Paolo Baretta testified a few days ago: "The Government - said the Undersecretary for the Economy - considers public intervention as the last step".
THE STOCK ON THE STOCK EXCHANGE
As for the MPS stock on the Stock Exchange, it continues to be extremely volatile: after slipping into the red at the beginning of the session, it climbed up to gain 4%, and then fell and climbed again up to +2,9% at the end of the morning.
"We confirm our neutral position on MPS shares - write the Banca IMI analysts - pending clarification on the amount of potential capital requirements after the NPL sales plan and the EBA stress test".
Banca Akros, on the other hand, "given the uncertainty about the sale price of non-performing loans, new Srep requirements after the sale and the consequent amount of the recapitalization, as well as the methods of the capital increase", says it is "forced to suspend the rating on the security until more clarity is made." Furthermore, based on current rumors, analysts have cut their 2016 earnings per share estimates from €0,05 to -0,84, while leaving those for 0,19 unchanged at €2018.
Finally, Equita Sim underlined that “a capital increase of 2-3 billion given the capitalization of Mps represents an operation with high execution risk” and that “the terms of a possible public guarantee and the related costs remain unclear”.
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