The world's oldest bank set for state takeover
The world's oldest bank is heading for nationalisation after failing to find private sector backers for a €5bn rescue.
Italian lender Banca Monte dei Paschi di Siena is set to turn bondholder and will probably fail to lure sufficient demand for a capital increase, leading to what would be the country's biggest bank nationalisation in decades, people with knowledge of the matter said.
The Italian cabinet led by Paolo Gentiloni (inset), the prime minister designate, was expected to meet as early as last night to approve a bank decree that would include measures to cover any funds missing in Monte Paschi's recapitalisation, a senior official said, asking not to be identified before the decree was presented to cabinet.
No anchor investor had shown interest in the stock sale, the Siena-based bank said late Wednesday. Two debt-for-equity swap offers would raise about €2bn by converting bonds into equity, the lender said.
The interest would probably be insufficient to pull the deal off, said the people, who asked not to be identified before a final assessment.
"Nationalisation after five years of restructuring, two state bailouts and €8bn of wasted private funds is at the very least a missed opportunity, if not an outright failure of both the private and public sector," Fabrizio Bernardi, an analyst at Fidentiis Equities, said.
Monte Paschi ceo Marco Morelli had crisscrossed the globe looking for investors to back the bank's reorganisation plan, which included a share sale, a debt-for-equity swap and the sale of €28bn worth of soured loans.
A nationalisation of Monte Paschi would be the biggest in Italy since the 1930s. It could be followed by rescues for lenders including Veneto Banca and Banca Popolare di Vicenza as part of a €20bn government package.
The government would back lenders that fail to raise money privately, using a fund that would intervene if needed, and the banks would not be named specifically in the text of the decree, the official said.
The European Commission has approved the plan, the official said, adding that shareholders would be hit, but the aim was to limit losses for stockholders and bondholders.
The lender's subordinated bond risk is at a record amid concern the securities will share in the burden of a bailout. Monte Paschi's €379m of junior notes due in September 2020 fell 2c to trade at an all-time low of 46c per euro, according to data compiled by Bloomberg - pricing in steep bondholder losses.
State intervention and a hit to bondholders is the most likely scenario for Monte Paschi, which "could reduce the systemic risk for the sector," Manuela Meroni, an analyst at Intesa Sanpaolo SpA, said in a note to clients yesterday.
Qatar's sovereign-wealth fund, which had considered an investment, hasn't committed to buying shares, people with knowledge of the matter have said.
Other institutions that were considering buying shares have indicated that they would put funds in the troubled bank only if it's able to raise €1bn from cornerstone investors, according to the people. (Bloomberg)