Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Italy faces capital demand of more than $8 billion to offload Monte dei Paschi

Stock MarketsOct 18, 2021 02:35PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Banca Monte dei Paschi's headquarters in Siena, Italy, October 27, 2017. REUTERS/Stefano Rellandini

By Giuseppe Fonte and Valentina Za

ROME (Reuters) -Italy has been asked to provide more than 7 billion euros ($8 billion) in capital to UniCredit to strike a deal over Monte dei Paschi and offload as much as possible of the state-owned bank to the stronger rival, two people close to the matter said.

UniCredit, Italy's No. 2 lender, agreed on July 29 to discuss buying selected parts of Monte dei Paschi (MPS) from Italy's Treasury, which rescued the Tuscan bank in 2017, spending 5.4 billion euros.

Under the terms of the bailout, Italy must cut its 64% stake in MPS by mid-2022 at the latest. Negotiations between UniCredit and the Treasury have entered a crunch phase and a preliminary accord was expected in time for a UniCredit board meeting on Oct. 27 to approve third-quarter results.

However, one person involved in the discussions said that more time may be necessary and it was unclear at present whether a draft accord could be reached this month.

"Talks are in the final stretch, we need to see if the conditions exist to close the deal," a Treasury official told Reuters, speaking anonymously due to the sensitivity of the issue.

Complicating matters for the Treasury, UniCredit agreed to enter exclusive talks over MPS only on condition an acquisition would leave its capital reserves unaffected while providing a double-digit boost to its earnings per share.

The parties have only recently started discussing capital needs, with a source saying UniCredit sent a proposal to the Treasury that envisages various scenarios depending on the portion of MPS it takes on.

The Italian press reported at the weekend that a capital injection of close to 7 billion euros was necessary if UniCredit were to take all but 300 MPS branches mostly in Italy's poorer south, while also leaving behind the bank's capital services unit, leasing and factoring arm, and IT centre.

UniCredit has said it is targeting MPS' branches in Tuscany, Lombardy, Veneto and Emilia-Romagna.

But the two sources said the capital outlay would be more than 7 billion euros if UniCredit were to take on the largest possible portion of MPS.

With the structure of the deal still under discussion, it remains to be seen how UniCredit's demands will be met. The Treasury declined to comment.

MPS' capital raising needs investor participation to comply with EU rules on state aid, according to a copy of a confidential document detailing the transaction seen by Reuters.

With UniCredit - dubbed Uranus in the document - set to finance the MPS' acquisition in shares, the MPS rights issue would give new investors a way into UniCredit, while the Tuscan bank's existing shareholders, including the Treasury, are also set to become investors in UniCredit.

UniCredit's capital requests are much higher than a 2.5 billion euro capital raising MPS has planned for next year were it to fail to find a partner.

But a fourth person close to the matter said that while securing a permanent solution to MPS' woes was extremely costly, a smaller capital injection risked providing only a medium-term fix, adding UniCredit was ready to walk away from a deal if the terms set in July were not met.

UniCredit has said it will steer clear of legal risks stemming from mismanagement and any MPS' problem or risky loans, which will go to state-owned bad loan manager AMCO.

The document said the legal risks, together with MPS' assets not transferred to UniCredit or other lenders such as MCC and MPS' historic properties in Siena, would go to Fintecna, another state agency. ($1 = 0.8637 euros)

Italy faces capital demand of more than $8 billion to offload Monte dei Paschi

Related Articles

Bitcoin falls 8.4% to $49,228.82
Bitcoin falls 8.4% to $49,228.82 By Reuters - Dec 04, 2021

(Reuters) - Bitcoin dropped 8.4% to $49,228.82 at 20:01 GMT on Saturday, losing $4,514.87 from its previous close. Bitcoin, the world's biggest and best-known cryptocurrency, is...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email