How Unicredit is fighting for the Monte dei Paschi crisis bank

Unicredit is still reluctant to take over a complete takeover and only wants to take over parts of the bank. And the good ones. According to Italian media reports, the mother of the German Hypovereinsbank is interested in around 1,100 branches.

Accordingly, around 300 branches, which are said to be mainly in Sicily and Apulia, in the economically weaker south of the country, would not be taken over. According to reports, Unicredit intends to take over 50 billion euros in assets. A good 40 billion rather not.

This most likely includes the 6.2 billion euros in legal risks that MPS carries around with it, as well as the non-performing loans worth 4.15 billion. In addition, there are around 14 billion euros in particularly endangered loans (“Stage 2”). In contrast, Unicredit is said to be very interested in the Roman online bank Widiba.

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Unicredit does not comment on all of the speculation. One is in ongoing negotiations and cannot comment on them, it just says.

Downsizing is a key issue

What we know: A central point in the talks is also the reduction of jobs. According to reports, 5,000 to 6,000 jobs are to be eliminated, most of which could be cushioned through retirement regulations – but the bank would need a billion-dollar capital increase for this.

At MPS, an average of 15 employees work per branch, according to a bank insider. On average, the number of employees per branch in Italy is closer to ten to eleven. “The Italian taxpayers are currently financing an inefficient bank,” says the industry expert.

In the middle of the negotiations there is also resistance to the takeover in politics. Matteo Salvini, head of the right-wing ruling party Lega, recently called for a merger – and not a sale. The Ministry of Finance should rather promote a merger with smaller banks such as Banca Carige. He speaks of 7,000 jobs that could be lost.

MPS is considered the oldest bank in the world, founded in 1472, and the name alone has an estimated brand value of 500 million euros. After the bank got stuck with takeovers after the financial crisis, the Italian state stepped in in 2017 and pumped a good 5.6 billion euros into the ailing institute. Since then, the Ministry of Finance has been the majority owner, holding around 64 percent. The government has already signaled that it will inject capital and also assume legal risks. In addition, the potential buyer should receive tax advantages on the takeover.

Unicredit boss is ready to talk

Andrea Orcel, the new Unicredit boss since April, is in principle open to acquisitions. Completely different from his predecessor Jean Pierre Mustier, who was still vehemently against takeovers – especially against the MPS deal, which has haunted the Italian banking world for years. In the end, Mustier left because of strategic inconsistencies.

Unicredit boss Andrea Orcel

The bank has recently come under pressure on its home market.

(Photo: Bloomberg)

But Orcel is also considered a tough negotiator. At MPS, he can fully exploit this toughness – due to the lack of alternatives. It is not exactly the case that half of Italy is fighting for the bank from Tuscany, on the contrary. Even after the exclusive 40-day period has expired, no new bidders have appeared on the market so far.

At the moment, two other institutes, Medio Credito Centrale (MCC) and Amco, are looking into the books. However, they are not competitors, but constructs that are both indirectly linked to the Ministry of Finance. MCC takes care of guarantees for small and medium-sized companies, while Amco takes care of non-performing loans in particular. Both institutions could take over the parts of MPS that Unicredit does not want to buy. MCC, for example, is also the remaining branch business.

MPS presented its half-year figures in August. The bank made a net profit of 202 million euros – in the pandemic year 2020 there was a loss of 1.68 billion euros. But the equity ratio remains low at 10.6 percent, the share of bad loans is still 4.5 percent.

Italy is to be given greater weight in the Unicredit strategy

For Orcel, the acquisition of MPS would be the first big deal as the new CEO. Even if he wants to present his extensive strategy first, it is already clear that Italy should be given greater weight in the future.

Unicredit has come under pressure on its home market since its biggest competitor Intesa Sanpaolo took over the medium-sized bank UBI Banca. In the home market of Lombardy, the region with Milan in the middle, even the much smaller BPM Unicredit has pushed into fourth place in the customer ranking. That is why the numerous MPS branches in the north would be so important for the bank.

More: An ex-minister is shaking up Italy’s banking market