|Bid||2.0910 x 0|
|Ask||2.1790 x 0|
|Day's range||2.1180 - 2.1670|
|52-week range||1.0120 - 2.2160|
|Beta (5Y monthly)||N/A|
|PE ratio (TTM)||N/A|
|Forward dividend & yield||N/A (N/A)|
|1y target est||N/A|
(Bloomberg Opinion) -- After a decade of scandals and multiple bailouts, Banca Monte dei Paschi di Siena SpA is back in the spotlight. This time, the Italian government is shopping around the 1.5 billion-euro ($1.7 billion) lender ahead of a European Union deadline for Rome to exit the bank next year.Loaded with legal risks that dwarf its market value, any investor will be loathe to buy Monte Paschi with those liabilities — not least in the midst of a pandemic.The risk to Italian taxpayers is that Rome offloads its majority stake in the world’s oldest bank at any cost. A sale to UniCredit SpA, as is being discussed, might solve Italy’s immediate problem of meeting the EU deadline, but the bigger bank would demand strong financial guarantees. A Paschi merger would also make it harder for UniCredit to pursue more compelling deals.It’s no surprise that Italy has restarted talks with UniCredit to sound it out on Monte Paschi. Foreign banks haven’t shown much interest and Intesa Sanpaolo SpA, UniCredit’s main rival, is busy buying UBI, another lender that might have made a good merger partner for Paschi.Equally predictable is that UniCredit is pushing back. The company wants the government to cover any capital shortfall from a potential merger and the legal costs, according to press reports. History isn’t on Rome’s side. In 2017, the state funded Intesa’s purchase of two failing lenders.Why would UniCredit accept anything less this time? Chief Executive Officer Jean Pierre Mustier has focused on returning capital to shareholders after cleaning up his own bank. Strategically, taking over another mid-tier Italian lender, Banco BPM SpA, makes more sense. A BPM deal would reinforce UniCredit’s position in Lombardy, the economic engine of Italy.A merger in Germany, UniCredit’s second-biggest market, would be even more compelling. While cross-border deals remain difficult in Europe, if Germany’s Commerzbank AG were to come up for sale, UniCredit would be better off pursuing that purchase.The reason Mustier is being pressured over Paschi is that other avenues for the ailing lender are much less appealing. A combination with Popolare di Bari, which Italy is in the process of rescuing, wouldn’t return Monte Paschi to private hands.Adding to Rome’s urgency, Monte Paschi is close to selling 8 billion euros of bad loans to another state-owned entity later this year, a key milestone in its rehabilitation. The sale will erode Paschi’s capital, which the European Central Bank wants the lender to strengthen. A merger with a stronger bank would solve that problem.A greater risk is that Monte Paschi loses some of the 10 billion euros of legal claims against it, forcing it to set aside more funds and further eroding capital. The pandemic could also lead to a fresh avalanche of bad loans. Should it need to raise more capital, even with the backing of the state, the costs would be prohibitive and eat into already weak profitability. Analysts expect the bank to make just 76 million euros next year, which could be wiped out by higher interest costs.It’s arguable that Monte Paschi should have been wound down years ago — it was probably insolvent at the time of its last state rescue — but more visibility on the potential legal liabilities would at least strengthen Italy’s negotiating hand. While a return to private ownership could help salvage what’s left of the storied lender, Rome must do everything possible to keep a lid on the taxpayers costs.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- It took years for Italy’s banks to cleanse their books of the bad debt they built up after the financial and sovereign debt crises. After a few months of the coronavirus, they may be staring at another wall of soured loans.Among the countries worst hit by Covid-19, Italy’s strict lockdowns have crippled its economy and its small and medium-sized companies in particular. The nation’s banks are heavily exposed to the SME sector and government-backed loans and grants can only soften the probable blow from credit losses.While Italy’s biggest banks have capital cushions that should see them through the crisis without needing to tap investors, regulators say some smaller, less profitable lenders might not make it on their own. Under these market conditions, one would think that consolidation in the Italian banking sector makes perfect sense. But Unione di Banche Italiane SpA, a mid-sized commercial lender based in Bergamo — a hot spot of Italy’s virus outbreak — has ideas of its own. UBI, as the bank is known, is so keen to thwart an unsolicited takeover by its bigger rival Intesa Sanpaolo SpA that it’s making an unusual claim: The coronavirus is a material adverse change and should invalidate the bid. This attempted rejection of Intesa might make sense if UBI were trying to squeeze out a better price for its investors, but that doesn’t appear to be the case. It just seems to want to pursue its own plans, a strategy shareholders might end up regretting.Days before the stock markets peaked in February, Intesa made an all-stock offer for UBI that valued the country’s fifth-largest bank at about a 25% premium. Intesa Chief Executive Officer Carlo Messina didn’t endear himself to his UBI counterparts: His hostile bid, a big no-no in banking, came hours after UBI’s CEO Victor Massiah had presented a new strategic plan. Nonetheless, the rationale for a combination is as compelling now as it was before the coronavirus hit — if not more so.Under UBI’s pre-pandemic strategy, the lender was trying to repair its measly profitability by improving efficiency, focusing on higher-margin corporate investment banking and getting rid of more of its bad debt. Massiah also sees UBI as a potential aggregator of smaller Italian banks. An alternative deal with Banco BPM SpA has been mooted.It’s unclear why Massiah’s approach is more appealing than a takeover by Intesa. The suitor may have to dial back its lofty dividend expectations for the merged company as the pandemic wrecks the economy, but if it achieves two-thirds control of UBI, it should be able to deliver chunky cost cuts by combining the two businesses.A tie-up between UBI and Banco BPM, by contrast, would leave little room for maneuver should credit losses spiral and the revenue outlook weaken, as expected. Analysts at JPMorgan Chase & Co. predict that non-performing loans in Italy could surge by 162 billion euros ($178 billion), under its worst-case scenario. While UBI has slightly better credit quality than its peers, 23% of its loan book is to SMEs, compared to Intesa’s 20%. The figure stands at 34% at Banco BPM.There is an argument that Italy could do with a third strong lender to rival Intesa and UniCredit SpA, and that UBI could team up with somebody else to deliver that. Italy’s antitrust authority is reviewing the deal. But with the economic damage caused by Covid-19, the Intesa-UBI deal has become more attractive. UBI’s shareholders should at least have their say on whether they support the idea.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.