Mps, here are the nodes of the mountain (in the balance)
The point about Mps. All the open questions on Monte dei Paschi di Siena, recent developments, the latest rumors and (uncertain) scenarios
The Ministry of Economy and Finance, majority shareholder of Banca Monte dei Paschi di Siena with a 68% stake, continues to look for a partner for the bank, and according to rumors it is trying to snatch Unicredit's yes. , which for the moment however continues to remain firm on the "No M&A". In order to identify a possible white knight for MPS, the Treasury would have selected Bank of America, in Italy led by Nino Mattarella (financial consultant), and Orrick (legal consultant) as advisor. However, to make the Bank 'attractive' there are several issues still to be resolved: first, the capital increase that MPS needs, which according to rumors should be around € 2-2.5 billion. Second, the amount of lawsuits from Monte that bring the potential for damages to be dealt with to over 10 billion. In this context, in order to favor aggregation operations, the government envisages the possibility of converting the Dta (Deferred Tax Assets) into tax credits. Banca Monte dei Paschi di Siena in the third quarter of 2020 presents Dta equal to 3.7 billion euros.
THE CAPITAL INCREASE
Mps in the report on the nine months of 2020 announced that following the significant provisions on legal risks made in the third quarter of 2020 (410 million euros after the sentence of the former top management Fabrizio Viola and Alessandro Profumo), the effects of the transaction Hydra (the proportional spin-off of Npl in favor of Amco), of the macroeconomic scenario penalized by Covid and regulatory changes, a scenario of capital shortfall emerged with respect to the Srep capital requirements. The Bank therefore moved to evaluate capital strengthening initiatives with the full support of the controlling shareholder.
THE BOARD ON RECAPITALIZATION
The board of directors of Banca Monte dei Paschi di Siena met on Thursday 26 November to examine the effects of the spin-off of the Npls to Amco and the provisions on legal risks and possible initiatives to fill the capital requirement. A press release has not yet been issued by Mps, so the exact amount of the recapitalization is not known.
THE INDISCRIPTIONS ON THE NEED FOR CAPITAL
Milano Finanza writes that, according to estimates circulated in recent weeks, a capital deficit of 2-2.5 billion euros would have emerged for Mps, which the directors and the majority shareholder will have to deal with quickly. There are various hypotheses on the table: from a reinsuring operation to transfer the credit risk on performing loans to the placement of an Additional Tier 1 bond up to an issue of shares. The capital raised will be used to bring the assets of MPS above the minimum levels required by the supervisory authorities.
THE OPERATION WITH AMCO
The Common Equity Tier 1 capital ratio of the Sienese institute was mainly affected by the sale of 7.5 billion in impaired loans to Amco, the Asset Management Company specialized in the management of impaired loans 100% owned by the Ministry of 'Economy and Finance. The operation, in fact, while on the one hand saw MPS drop to around 4% in the ratio between loans and NPLs, on the other hand it involved a reduction in assets of 1.13 billion euros, equal to 140 Cet1 points.
THE QUESTION OF LEGAL RISKS
The second issue to be resolved for Mps, combined with that of the capital increase, is the issue of legal risks . In fact, Monte dei Paschi di Siena has a number of lawsuits that bring the potential for damages to be dealt with to over 10 billion.
THE RUMORS ON THE PROBLEM OF LEGAL RISKS
Reuters in a recent article writes that the Treasury is considering a spin-off, or the transfer of legal risks affecting Mps to a state-controlled company.
THE POSSIBLE STANDARD FOR DTAs
While on the one hand the Mef seeks to resolve the issue of capital increase and that linked to legal risks, on the other hand the government to favor M&A operations in the next Budget Law could insert the possibility of converting the Dta (Deferred Tax Assets) in tax credits. Last Thursday Margrethe Vestager, the EU Commissioner for Competition, revealed that there are ongoing contacts between the European Antitrust and Rome on the issue of the tax treatment of off-balance sheet deferred taxes, one of the cornerstones for the privatization of Banca Monte dei Paschi di Siena. "We are in contact with the Italian authorities", explained Vestager, highlighting that "what we look at when we examine tax incentives is whether they are selective measures: there will be a benefit" only for a sector or part of a sector , creating a problem for other parts of the economy?
THE OPINION OF EQUITA SIM
Equita Sim explains that Vestager's words on the single sector refer to the banking sector. However, analysts point out that on the basis of the drafts circulated so far, the structure of the rule seems to be generic and not specific to banks. Experts therefore believe "probable that, possibly with some corrections (for example on the maximum amount of convertible DTAs)", the rule "can finally be approved". Banca Monte dei Paschi di Siena in the third quarter of 2020 presents Dta equal to 3.7 billion euros.
THE ANALYSIS OF THE SUN SUN 24 HOURS
The mechanism of incentives for business combinations that passes from the possibility of transforming DTAs into tax credits can concern up to 7,065 companies, which will be able to convert Deferred Tax Assets for about 3 billion, underlined Il Sole 24 Ore: "Di these, the vast majority relate to tax losses that can be carried forward, and the rest relate to national Ace (Aid to Economic Growth) surpluses ”. The figures in the technical report trace a different identikit to the tax aid for the dimensional growth of businesses compared to the analyzes circulated on the eve, the Confindustria daily remarked: "The new regulation does not appear as a tailor-made intervention for Monte dei Paschi, which, moreover, will benefit to a lesser extent than the hypotheses circulated in recent weeks. But the audience is much larger. Let's see why. The aid transforms a share of the losses recorded in this period of crisis into an asset item. These are fiscally carry-forward losses, which can be converted into tax credit with the new rule. A conversion, however, which does not take place for free, but triggers a 25% commission calculated on the total assets for prepaid taxes transformed into tax bonuses. Not only that: each new entity born from the incentivized aggregation will not be able to transform an amount exceeding 2% of the total assets of the parties participating in the extraordinary operation. The operational impact of the new measure derives from the intersection of these complex variables. Which in total can present to the public budget a gross cost of 3,087.6 million between 2021 and 2022 (40% must be paid in the first year and the rest in the second) ".
MONTE DEI PASCHI DI SIENA AND THE M&A
The resolution of Banca Mps' problems and the government's incentive for mergers through the law on DTAs could improve the position of the Sienese Institute within M&A banking. In the report on the nine months of 2020, the Treasury reaffirmed, among other things, the intention to follow up on the commitments undertaken by the Italian Republic towards the European Union and to carry out a market operation that identifies an anchor investor and / or a banking partner of adequate standing, in order to restore and ensure the competitiveness of Mps.
Il Sole 24 Ore reports that the Mef has chosen the advisors for the search for a partner for Mps: Bank of America, in Italy led by Nino Mattarella (financial advisor), and Orrick (legal advisor). The main road leads to Milan and precisely to Piazza Gae Aulenti, where Unicredit continues to remain firm on the "no M&A" position but in the meantime it has been thinking (and negotiating with the Treasury) about a possible merger with Siena for months. The key point, of course, is the conditions under which the bank would be offered.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/mps-tutti-i-nodi-del-monte-in-bilico/ on Sun, 29 Nov 2020 15:07:59 +0000.