- UniCredit considers delaying sale seen as crucial by ECB
- Lackluster IPO could affect other banks' financing plans
Banca Popolare di Vicenza SCpA is struggling to draw buyers to its initial public offering, a deal deemed key by regulators to avoid a resolution that would punish creditors and rattle Italy’s financial system.
“If they can’t pull off a successful IPO, the chances of a resolution become greater and that would be bad for the entire Italian banking system, leading to a downward spiral,” said Stefano Girola, who helps manage about 40 billion euros ($46 billion) at Syz Asset Management in Lugano, Switzerland.
Pop. Vicenza is seeking to raise as much as 1.8 billion euros to shore up its balance sheet as the cooperative lender transforms into a joint-stock firm. The European Central Bank, warned that without a capital increase, due by April 30, the lender would need to draw on creditor funds to bolster buffers. Veneto Banca SCpA, Banca Monte dei Paschi di Siena SpA, and Banca Carige SpA also face deadlines to sell stock or reorganize while four lenders rescued last year are up for sale.
UniCredit SpA, the arranger and sole guarantor of Pop. Vicenza’s IPO, is assessing whether to postpone the deal, it said on Wednesday. Failing to find buyers for the stock would otherwise force Italy’s biggest bank to purchase the shares.
“If UniCredit is forced to consolidate Pop. Vicenza simply because the stock sale is not successful, none of the Italian troubled banks would be able to find a consortium for a capital injection,” according to Fabrizio Bernardi, an analyst at Fidentiis equities.
The possible IPO delay signals that efforts by Italy and the ECB to clean up the country’s banking industry has yet to convince buyers.
“Investors simply don’t believe in the ability of Italian banks to improve profitability and boost capital,” said Jacopo Ceccatelli, chief executive officer of Marzotto SIM SpA, a Milan-based brokerage. He cited mountains of bad debt, high costs a sluggish economy and “in some cases, poor governance and misconduct of former managers also hurt confidence, putting into doubt turnaround plans.”
Italian lenders are struggling to strengthen profit and capital after bad loans climbed to 360 billion euros, preventing them from making fresh loans and holding back the country’s economy. The rescue of four regional lenders last year that imposed losses on bondholders, rattled customers -- traditionally among the largest holders of such debt -- and spurred a flight of deposits.
“Tough regulator’s demands may ultimately be counterproductive and heighten systemic risk,” Alberto Cordara an analyst at Bank of America Merrill Lynch Global Research, wrote in a March 23 report. “Italy was used as a testing ground when four banks were put under resolution last year, which led to severe dislocation in the equity and debt markets.”
Veneto Banca plans to raise about 1 billion euros in an IPO in June as part of a restructuring plan agreed with the ECB to strengthen capital, while Banco Popolare SC announced a 1 billion-euro share sale by October to win the ECB’s approval to buy competitor Banca Popolare di Milano Scarl. Monte dei Paschi and Carige are seeking partners.
A spokeswoman for Pop. Vicenza declined to comment. Officials at the ECB weren’t immediately reachable for comment.
Lenders are seeking to raise funds and attract fresh backers as European banking stocks dropped to the lowest since 2012 this year. The Stoxx Europe 600 Banks index fell 21 percent and seven of the 10 worst-performing stocks on the 47-member index are Italian.
“Outside the country, there isn’t the sense that Italy is pulling out of the recession,” Banca Monte dei Paschi di Siena Chief Executive Officer Fabrizio Viola said in a speech in Milan on Thursday. “Investors are watching us, but they’re not exactly lining up to put in billions, whether they’re banks or something else.”