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Negotiations over the sale of the Italian bank Monte dei Paschi on the verge of collapse

Collapse of negotiations hits government led by former European Central Bank governor Mario Draghi, who needs to reprivatize banks by April under agreement with European authorities when Rome rescues Tuscan banks in 2017 Will give.

Officials were able to announce the end of the negotiations on Sunday, according to one familiar with the negotiations.

UniCredit, headed by bank veteran Andrea Orcel, has begun exclusive negotiations with the Italian Treasury over Monte dei Paschi this summer. UniCredit has agreed to negotiate the acquisition of only selected parts of the bank, excluding many sectors of the business, including the central office, some of the loans, including all sour loans, and many branches in southern Italy. ..

At the time, UniCredit stated that it would only pursue transactions that did not affect its capital position. It also needed to protect against the billions of legal costs resulting from the numerous ongoing proceedings of the Tuscan Bank.

Currently, the parties are at odds over how much new capital will be needed to make the transaction plausible for UniCredit. Milan-based banks have asked the Treasury to recapitalize Monte dei Paschi over € 7 billion, or $ 8.15 billion, to close the deal, but the Treasury paid up to € 5 billion. I haven’t. One who is familiar with the story.

The new money will also be needed to pay the eviction costs of as many as 7,000 Monte dei Paschi employees, or about one-third of bank employees.

Negotiations could come back in the next few days, but some stakeholders said it was unlikely that the Treasury and UniCredit would reach an agreement at this stage.

Draghi took office this year and was tasked with reviving the Italian economy, which had barely grown in the last two decades. To do so, he decided to use his short time of power (he has a term of at most one and a half years) to push forward with some changes that he considers to be overdue. There is.

These include many structural reforms to modernize the Italian economy and painful decisions about companies such as Monte dei Paschi, which has long been a drag on the Italian economy.

Many Italian politicians have complained that the conditions required by UniCredit would cost the Italian government an excessive amount of money to “fire-sell” Siena-based banks.

But when negotiations with UniCredit collapse, Rome has little time to find a solution for its lenders.

UniCredit is the only suitor to date who has seriously considered the acquisition of a Tuscan bank.

With a history dating back to 1472 during the Italian Renaissance, Monte dei Paschi has been in trouble for the Italian financial system for over a decade.

During this period, banks suffered an increase in non-performing loans, a chronic lack of profitability, a bad reputation legal scandal, and a very costly and unlucky acquisition of a rival Italian bank.

Once the third largest bank in Italy, Monte dei Paschi has become a poster child for European banking issues. It was put up for sale in 2014, but I couldn’t find a suitor.

After years of bankruptcy, Rome stepped into nationalization, spending € 5.4 billion, then more than $ 6 billion, and European regulators to resell banks by early 2022. I promised.

Write in Giovanni Legorano (giovanni.legorano@wsj.com)

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Negotiations over the sale of the Italian bank Monte dei Paschi on the verge of collapse

Source link Negotiations over the sale of the Italian bank Monte dei Paschi on the verge of collapse

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