As the days of truth approach for Mps, a precious assist arrives from Frankfurt for the future of the Sienese bank. While recalling that the final decisions on the bail in are up to the European Commission, yesterday Mario Draghi he said that "public support for banks" is foreseen by the BRRD directive and "can be very useful in exceptional circumstances". The President of the ECB also underlined that NPLs are a problem for the future profitability of institutions and for the transmission of monetary impulses from the central bank to the economy, therefore their weight must be reduced as soon as possible.
Draghi's words sound like an invitation to speed up the negotiations for Monte Paschi. Siena's proposals to secure the institution were examined just yesterday morning by the Supervisory Board of the ECB (which is German-led), to then return to the table of the Bank's board of directors in the afternoon.
Neither meeting was definitive, but the goal is to close by 29 July, publication date of the Eba stress test. Given the foreseeable rejection of MPS, the timely publication of the plan also serves to prevent new storms on the stock market. For this reason, the decisive BoD could be that of next week, already scheduled for the approval of the half-yearly.
Some details are missing, but the steps to take now seem clear. First of all, it is necessary to plan the disposal by 2018 of another 9,7 billion net non-performing loans (as requested by the ECB). The Fondo Atlante still has 1,7 billion euros on hand, resources with which it should buy half of the equity tranche of the securitization.
The other tranches issued by the vehicle that will carry out the securitization (the senior tranche guaranteed by the State and, possibly, the mezzanine) should instead be financed by JP Morgan with a bridge loan of approximately 6 billion and a one-year maturity, a period during which it will be necessary to find investors who will purchase the tranches.
This brings us to 7,7 billion. The two that are missing to achieve the goal roughly correspond to the loss that Mps will suffer having to sell the NPLs at a lower figure than the one entered in the balance sheet. The final quantification of this figure will depend on the effective contribution of Atlante (which could be able to increase its firepower) and on the sale price of the non-performing loans, which according to estimates should be around 29-30% of the nominal value.
At that point phase two will start: the capital increase (the third consecutive after those of 2014 and 2015 which had brought in a total of 8 billion). To the approximately two billion linked to the loss on NPLs, the Bank would like to add another 1,5-2 billion to clean up the balance sheet of other loans whose repayment appears unlikely. The need for capital would thus rise to 3,5-4 billion euros and this figure should be guaranteed by a pool of banks led by Mediobanca and JP Morgan, advisors in addition to Ubs and Citigroup.
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.
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, since these are resources that cannot be used to guarantee shares, but only convertible bonds.
However, the derogation granted by Brussels will not be decisive on all fronts, because if the market does not fully cover the capital increase and the State is forced to intervene, the so-called "burden sharing", which implies the cancellation of subordinated bonds. 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.
Meanwhile, Mps travels on the roller coaster in Piazza Affari. Stocks started off sharply and then quickly reversed course, so much so that they lost 2,3%, before recovering slightly. Investors are waiting to understand the price attributed to the non-performing loans being negotiated.
