|Bid||0.0000 x 0|
|Ask||0.0000 x 0|
|Day's Range||1.8100 - 1.8100|
|52 Week Range||1.4000 - 2.8100|
|Beta (5Y Monthly)||1.52|
|PE Ratio (TTM)||5.97|
|Forward Dividend & Yield||N/A (N/A)|
|Ex-Dividend Date||May 18, 2020|
|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) -- The euro region has taken several steps to centralize banking regulation and supervision, but there is little sign that lenders are interested in seeking to merge beyond national borders. Two recent deals — one has been proposed in Spain, the other occurred in Italy — show that, for all the good intentions, Europe’s “banking union” remains incomplete.The European Central Bank — the euro zone’s top supervisor — will be content with domestic mergers for now, since these can still help reduce excess capacity in an overcrowded industry. But politicians and regulators must redouble efforts to harmonize the rules in the monetary union, so that bankers have more reasons to look abroad. The euro area needs more cross-border mergers not just as a further show of unity, but as an essential step to boost financial stability.Yet domestic mergers are still the only game in town. Two weeks ago, CaixaBank SA and Bankia SA said they were exploring an all-share deal that would create Spain’s largest domestic bank. The announcement came only weeks after Intesa Sanpaolo SpA took over rival Ubi Banca SpA to become Italy’s largest lender by assets.There is no doubt that, especially during times of crisis, the most obvious combinations are those not far from home. The easiest rationale for merging banks is that cutting costs and redundant branch networks can yield significant savings.However, cross-border mergers offer excellent opportunities for revenue diversification. These may be less obvious during a pan-European recession, but they are especially helpful when an economic shock hits one market more than others.The ECB has no preference between domestic and cross-border mergers. A national combination can help increase a country’s financial stability when it leads to higher profitability or combines a stronger bank with a shakier competitor. In theory, allowing weak banks to exit the market in an orderly way can also reduce systemic vulnerabilities, but Europe has proved stubbornly incapable of letting lenders fail. A merger is often the only realistic alternative.But transnational deals offer additional gains to supervisors: Above all, they can loosen the dangerous ties between a bank and its home state. This means that when a country is in trouble, the lender will suffer less; and when the bank is in poor shape, its difficulties will be spread across different economies. This diffusion can be particularly beneficial in the euro zone, since a shared currency and monetary policy means individual governments have fewer tools to address isolated crises.The ECB has not been shy to emphasize the advantages of cross-border mergers, and yet they are still proving elusive. Banks are fearful that efficiency gains won’t materialize, given the difficulty of operating in different countries with language and cultural barriers. National supervisors may also have a preference for ring-fencing their own domestic markets, so that they do not have to worry about rescuing foreign subsidiaries. Most politicians hate a takeover of a domestic bank from abroad, as they fear losing influence over a key lever of the economy.In July, the ECB launched a public consultation to clarify its approach on mergers. It is seeking to reassure lenders about the supervisory demands for new capital, which bankers believe are too high and uncertain, and have hence stood as an important obstacle to cross-border combinations.Politicians must do their part too, for example, by stepping up efforts to create a single deposit guarantee scheme across the monetary union. This will reassure national supervisors that there is a broader European safety net should any bank get into serious trouble. Olaf Scholz, Germany’s finance minister, called for this in a 2019 article for the Financial Times, but, as I had feared at the time, there has been limited progress made since.The pandemic has prompted European leaders to break taboos. Consider, for example, the creation of a joint recovery fund to support countries in crisis. Europe’s lenders could do with the same spirit.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Ferdinando Giugliano writes columns on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.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) -- Facing a mountain of pandemic-induced bad loans, two of Spain’s biggest banks want to merge to help cushion the blow. It’s a smart, preemptive move and a test case for regulators that are keen to encourage consolidation. Europe’s overbanked finance industry should pay attention.Investors are right to cheer the news. Shares in CaixaBank SA and Bankia SA — domestically focused, commercial lenders — jumped after they said they were holding preliminary talks for an all-stock deal. Shareholders have been shunning Europe’s lenders since the onset of the pandemic because of fears that they’ll struggle for years to restore profitability, once governments turn off the emergency financing taps and their loans turn sour. CaixaBank’s takeover of smaller domestic lender Bankia may not be the transformative cross-border merger that would reshape the European industry, but it will create the biggest bank in Spain by assets, loans and deposits, overtaking Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA.Having a handful of strong and diversified national lenders amid the worst economic contraction in living memory will help Spain. Crucially, this combination has the potential to meaningfully reduce overcapacity in the country’s banking sector.Bringing the two companies together will create a bank with a 665 billion-euro ($790 billion) balance sheet and offer the opportunity to reduce branch duplication. CaixaBank, based in Barcelona, and Bankia have large presences in cities such as Valencia and Madrid. As much as 23% of their branch networks overlaps, according to analysts at Barclays Plc. Assuming they could cut half of the staff from every closed branch, the analysts forecast that the banks could save about 500 million euros a year, boosting pretax income across the merged group by 18% by 2022.The tie-up would also strengthen CaixaBank’s larger consumer and corporate loan book by absorbing a bank that’s more exposed to the mortgage market.Still, the combination isn’t perfect. CaixaBank enjoys a larger share of income from asset management and insurance, which is more pandemic-proof than Bankia’s greater reliance on lending income. Negative interest rates add to that disadvantage.What’s more, assuming a deal is agreed, governance could be tricky. Spain still owns 62% of Bankia after rescuing the bank in 2012, and it would be left with as much as 17% of the new group, based on a potential takeover premium of 30%. That would also leave Criteria, CaixaBank’s main shareholder, with up to 31%.And it isn’t certain how costly the deal will be for investors. The Barclays analysts estimate that the combination could release as much as 8.7 billion euros in so-called negative goodwill — the difference between the price paid for the assets and the reported book value — that would help pay for the combination. The amount of negative goodwill at the banks’ disposal, and whether regulators will allow it, will be critical to curtailing the tab for shareholders.As Intesa Sanpaolo SpA’s takeover of a smaller rival in Italy showed earlier this year, there are ways to tackle a bloated cost base. Right now, it’s impossible to tell just how painful the economic downturn will be. Better to get ahead of it.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.