For the CEO of Banco Popolare Pierfrancesco Saviotti the request for an increase is excessive but the merger is too "important". For the CEO of Bpm Giuseppe Castagna this is a "brilliant" operation for all stakeholders. For now, the day after the announcement and on the day of the presentation of the operation to the financial community, the shares of the two institutes both drop around 5% on the Stock Exchange. It will take some time on the market to digest and understand the numbers of a merger which creates the third largest banking operator in Italy, behind Intesa Sanpaolo and Unicredit and ahead of Ubi Banca, with assets of over 170 billion euros and a capitalization from 6,5 billion euros in a very polarized ranking (Intesa 41,7 billion, Unicredit 22 billion before falling to 3,5 billion UBI). For now, some analysts seem to be positive: the Equita experts, for example, estimate a potential rerating of 30% for the post-merger stock.
The merger between Bpm and Banco will involve the creation of a newco (the name is still to be decided) in the form of a joint stock company: the shareholding relationships will see Banco Popolare own 54% of the capital and Bpm 46% of the capital.
However, all this against a capital increase of 1 billion, for which the guarantee consortium (Mediobanca and Merrill Lynch) has already been found and therefore defined as "safe" by Saviotti. The increase was strongly requested by the ECB in view of the birth of a large group which, specified Saviotti, "must present itself in the best possible way". Saviotti had long ruled out the possibility of proceeding with a capital increase: after the various tests and assessments by the ECB, the bank summarizes the meaning of Saviotti's position, having reached (and exceeded) the required capital ratios, did not consider it justified the request for a further effort on capital.
BENEFITS OUTPUT EFFORT
“I contested the capital increase until the day before yesterday – Saviotti explained during the conference call – not because of a silly stance towards the regulators but because the two banks together could have managed the non-performing loans without needing the increase, respecting the parameters considered necessary by the ECB, but faced with a position that offered no alternatives in the board of directors we decided to meet the regulatory needs". In fact, it is an operation that not only marks the birth of a significant bank on national and European territory but also sanctions the kick-off of the M&A stimulated by the reform of the cooperatives on the transformation into a joint-stock company. With these premises the new bank is a candidate to be in the future a natural aggregating pole of other realities. "We believe the operation is so important - said Saviotti - that it was not the case to lose the opportunity for this request which still seems excessive to me but which we will complete".
With a hint of regret, Saviotti explained the decision to relinquish command of the group, becoming chairman of the Executive Committee: “The Banco integrates itself with great professionals. I'm only sorry that I'm of a certain age and that, at some point, I'll fold. The fact that the ball passes to Giuseppe Castagna, whom I've known for some time, has certainly accelerated my decision to leave the lead". . “It will be a great bank and the people who lead it will make a fundamental contribution in terms of skills and desire,” he added.
SOLID PROJECT
At the same time Giuseppe Castagna, CEO of Bpm, wanted to focus on the industrial aspects of the merger and on the strong development prospects. “It is a solid project, which has a very clear mission and a competitive positioning among the best in the country”, Castagna said, explaining that “the new entity will have a level of coverage of non-performing loans in line with the best Italian peers. This in spite of those who feared that this operation was not solid: we want to start the bank at the highest levels of the system".
The capital increase will be entirely allocated to credit coverage. In the new group, the level of coverage of non-performing loans will be 57,2% and of non-performing loans 43,8%, numbers which will rise respectively to 62,1% and 48,5%. “We have taken the top three Italian banks as benchmarks, these are numbers of considerable importance – commented Pierfrancesco Saviotti – since we were there we said we will do our utmost to give the market complete peace of mind. With these levels we have a totally calm future”.
And the maximum on the other hand is what was asked by the ECB which, in the words of Saviotti, wanted "a beautiful, rich and blue-eyed bank", to which the market could say absolutely nothing.
