Italian Finance Chief Resists Populists' Goal to Seize Carige

(Bloomberg) -- Italy’s populist leaders clashed with Finance Minister Giovanni Tria over the fate of struggling Banca Carige SpA, with both deputy premiers saying the government should nationalize it.

Tria told Italy’s parliament on Wednesday that a market solution is the best option for Carige, though it’s too early to say that a state intervention won’t be necessary. Any precautionary recapitalization would be for a limited time, he said.

Matteo Salvini, the deputy premier who heads the anti-immigrant League, said earlier that the government’s goal is to bring the Genoa-based lender under state control. His counterpart Luigi di Maio, head of the anti-establishment Five Star Movement, separately described the state’s role in Carige as a nationalization.

Their positions also contrast with efforts by Carige’s administrators to shore up the bank’s balance sheet, reduce bad loans and firm up a business plan to make the lender more attractive to a possible partner.

The bank has been in contact with 10 potential buyers including Italy’s UniCredit SpA and Banco BPM SpA and France’s BNP Paribas SA and Credit Agricole SA, which say they may be interested if Carige can reduce its non-performing loans and borrowing costs, according to a person familiar with the matter.

Carige special administrator Pietro Modiano on Wednesday, termed nationalization a “theoretical, extreme” hypothesis. The only reason such a step is discussed is due “to the precautionary recapitalization mentioned in the government decree as a last resort, which is not on the table and is not necessary.”

Read More: Italy Must Clear These Hurdles for a Bailout of Banca Carige

The lender, which was put under temporary administration by the European Central Bank, suffered a peak in deposit flight on Monday, mainly from institutional clients, the person said. An Italian government decision aimed at guaranteeing Carige’s future bond issues should limit the outflow, according to the person.

Italian and European officials have said Carige’s 24 billion-euro ($27.5 billion) balance sheet doesn’t pose a significant risk to the nation’s banking system.

Carige is aiming to resume alliance talks after implementing a plan to cut non-performing loans to below 10 percent of the total and reviewing the terms of a 320 million-euro bond sold to Italy’s deposit guarantee fund late last year, the person said. Potential buyers also include foreign funds, according to the person. Representatives for UniCredit, Banco BPM and BNP Paribas declined to comment.

‘State Control’

“I am sure that Europe will allow Italy to do what is good for Italians, that is to bring it under state control,” Salvini told reporters at a press conference in Warsaw on Wednesday. “If there are profits, the state will receive them, not some private bodies.”

Di Maio, in an interview with Il Fatto Quotidiano, said the case of Carige “is not a rescue, it’s a nationalization. There’s one rule: if the state puts money into a bank, that bank becomes a state bank.”

Fully nationalizing the lender remains a “concrete option,” Undersecretary to the Prime Minister’s Office Giancarlo Giorgetti told Ansa news agency Wednesday.

The Italian government approved state guarantees for any future bond issues by Carige and signaled that aid to the lender could follow the Monte Paschi SpA precedent, a so-called precautionary recapitalization to ward off serious disturbance to the economy.

Italy is creating a 1.3 billion-euro support fund for the lender, according to a decree published in the official government gazette. The state is also committed to backing up to 3 billion euros in new bonds which could be issued by Carige, the decree says.

The ECB placed the bank under administration after its main investor blocked a vital capital increase in late December, leaving Carige without one of the two pillars of a turnaround plan approved by the central bank. Special administrators were given a three-month mandate to reduce balance sheet risks and find a possible partner.

--With assistance from Fabio Benedetti-Valentini.

To contact the reporters on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net;John Follain in Warsaw at jfollain2@bloomberg.net;Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Ross Larsen, Kevin Costelloe

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