Italy to Work on Fixing Paschi After Approaching EU on Deadline
(Bloomberg) -- Italy’s finance minister said the country plans to work on improving the performance of Banca Monte dei Paschi di Siena SpA as it looks for a new buyer for the bank after a failed sale to UniCredit SpA.
“In the next few weeks and months, we will explore further options,” Daniele Franco said at a press conference in Rome on Thursday evening. “If there are none, or as long as there are none, we will continue to manage Paschi as shareholders, trying to ensure that it becomes ever more solid and efficient.”
Italy has already held initial talks with the European Union on extending a deadline to sell Paschi by year end. The world’s oldest bank was bailed out in 2017 and talks with Unicredit over its purchase collapsed over the weekend and needs a capital injection of at least 2.5 billion euros ($2.9 billion). UniCredit Chief Executive Officer Andrea Orcel signaled on Thursday that the bank has moved on after the collapse of talks and won’t re-enter negotiations.
Read More: UniCredit CEO Signals No Reprise of Paschi Talks After Collapse
The concern is now that Paschi, which has burned through about 18 billion euros in investor and taxpayer cash since 2008, will continue to weigh on state coffers. It was the worst performer in European stress tests earlier this year.
The government also extended fiscal benefits for mergers that would sweeten any Paschi sale for another six months to June 2022, but capped the amount that can be claimed to 500 million euros.
“It is probably best for a medium-sized bank like Paschi to merge with other financial institutions,” Franco said.
During the talks, Orcel argued that about 7 billion euros more was needed to restore Monte Paschi’s capital buffers and permit a deal that wouldn’t hurt his bank’s reserves, but the government was only willing to put in about 3 billion euros, according to people familiar with the matter.
“As we showed in how we managed this negotiation, we’re not willing to sell Monte Paschi at all costs and by any means,” Franco said. “There was a gap between what they wanted and what we were willing to give in to.”
A sale was needed because Monte Paschi continues to grapple with a legacy of legal risks and loose lending. With 4.5 million clients, 21,000 employees and 150 billion euros in total assets, the bank is considered too big to fail and a political liability for any government.
“The gap was on the size of the capital increase but especially on the value of the business,” the minister added. “We felt that the value that was offered to us was not adequate, and so we suspended talks.”
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