Fate of world’s oldest bank, Italy’s BMPS, unclear as talks collapse


The fate of the world’s oldest bank, Italy’s Banca Monte dei Paschi di Siena (BMPS), was at stake on Monday after negotiations for its sale to UniCredit failed.

Negotiations between UniCredit and Italy’s Economy Ministry, which has controlled BMPS since its state bailout in 2017, collapsed on Sunday.

They reportedly argued over the amount of public money UniCredit wanted to take on the burden of Monte dei Paschi, with the Corriere della Sera newspaper citing an 8.5 billion euros ($ 9.9 billion) bill for the ministry.

The government, which is obliged under EU rules to find a private buyer for BMPS by the end of 2021, will now likely be forced to “seek an extension” in Brussels, researchers from Morgan Stanley said in a note.

The failure of the deal is a headache for the government of Prime Minister Mario Draghi, which was eager to turn the page on one of the most intractable banking crises in recent Italian history.

“The fate of MPS does not seem very different from that of (the national airline) Alitalia,” the Stampa newspaper commented on Monday.

“No one other than the state seems willing to take responsibility for its inefficiencies,” he added.

Founded in Siena, Tuscany in 1472, BMPS went through years of hardship starting with a disastrous 2007 purchase from Antonveneta Bank at double its estimated value.

BMPS then fell into scandal when its management team was accused of accounting fraud and embezzlement.

Still weakened during the eurozone debt crisis by a bad debt attack on its books, BMPS was rescued in 2017 with a bailout that cost Italian taxpayers some 5.4 billion euros.

UniCredit, Italy’s second-largest bank, has long been viewed by Rome as the ideal buyer. The door to negotiations was opened under the leadership of UniCredit’s new CEO, Andrea Orcel, who took over in April.

– Back to the table ‘soon’? –

Lorenzo Codogno, an economist and a former senior official at Italy’s Economy Ministry, told AFP he was surprised the talks failed because BMPS would have been an almost perfect fit for Orcel’s stated intention to ‘extend UniCredit.

He predicted that the bank and the ministry would be back at the negotiating table “very soon”.

“The government will ask for a three or six month extension, and I think Europe would accept it.

“But it would be extremely difficult for him to get a change of attitude – such as nationalization or public intervention – that goes beyond what is currently expected,” he said.

Codogno said he believes the government is unlikely to be open to an offer from a foreign bank – if a foreign bank does come forward – due to the time required to perform the necessary due diligence.

For its part, UniCredit could look elsewhere for buyout opportunities, but “would encounter major difficulties” if it tried to expand into Europe, because the European banking union is “still far from real”.

“So effectively the two (the government and UniCredit) will eventually have to sit down and find a solution,” he said.

idea-aa / dl


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