Pop. Vicenza Owners Back IPO as Bank Becomes Joint Stock Company

  • Investors approve the proposals at a meeting in Vicenza
  • Bank to raise up to $2 billion in initial public offering

Banca Popolare di Vicenza SCpA’s owners approved a plan to raise as much as 1.8 billion euros ($2 billion) in an initial public offering and transform the cooperative lender into a joint-stock firm, a crucial step to ensure its survival.

Investors approved the proposals at a meeting in Vicenza, Italy, on Saturday, allowing Popolare di Vicenza to implement a restructuring plan to replenish capital and comply with regulatory requirements. Without a capital raising the bank would have to be resolved, imposing losses on creditors, the European Central Bank said in a letter published by the Italian lender this week.

Popolare di Vicenza, the country’s 10th-largest bank with about 40 billion euros of assets, is among Italian lenders under pressure from Europe’s new banking supervisor to shore up their finances. Italian bank shares and bonds have tanked this year over fears that lenders have yet to come to terms with more than 360 billion euros of bad loans clogging their books.

Popolare di Vicenza employs 5,500 people, and operates more than 600 branches. Its current shareholders are mainly customers who already lost most of their investment on writedowns that have shaved about 90 percent from the book value in recent years.

It will be the third time the bank has tapped investors in as many years, having raised 1.2 billion euros between 2013 and 2014. Those cash calls are under investigation after an ECB inspection revealed that the bank loaned money to customers to buy the shares, artificially boosting reserves. In some cases managers allegedly signed letters guaranteeing the bank would return or repurchase the shares.

The bank deducted 1.1 billion euros from its capital in December to reflect the accounting sleight of hand. Its common equity Tier 1 ratio dropped to 6.65 percent, below the ECB-recommended 10.25 percent.

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