New millionaire hole for Mps? The transfer to Amco of the 10 billion problem loans and the crux of the assessments. Fabio Pavesi's analysis
The state takes with one hand, with the other gives. As in a round game, the bitter odyssey of Mps, the former third Italian bank, is overwhelmed most of all by the post-2008 crisis. And from the cylinder of solutions to bring the Tuscan bank back to new normal, the Italian state plays a dual role. Buyer of bad debts from the bank of which he owns 68%. With the agreement reached in Europe, the bank should proceed to close the last step of its long crisis.
The public company owned by the Treasury 100% will be transferred to Amco , the former Sga, almost all the sick loans left in the belly of Mps. About 10 billion of bad debts and substandard loans that will be acquired by Amco, definitively freeing the balance sheet from the ballast of the past and making MPS in a position to restart on the market. Without this cleanup, the bank would have continued to be in plaster.
No buyer to replace the state (which must still come out of capital). The weight of bad debts with the inevitable write-downs would have continued to weigh on the bank's profitability, making it non-appealing for any buyer. Already the issue, now that the state bank sells sick loans to its shareholder, is obviously the price.
Above all, who risks earning and who risks losing in this sort of double match?
The changeover would be painless for Mps if the sick loans were bought by Amco at the price at the bank's balance sheet. Well the 11.6 billion of sick loans are on the balance sheet at 5.8 billion, 50% of their gross value.
If Amco purchases at the value to which they are registered, there would be no impact on Mps' income statement. But can the public bad debts management company buy the bad debts of 50 Mps? The NPL transaction market says that the average purchase values are in a fork between 30 and 40% to be optimistic.
If Amco were to buy at market prices, MPS would find itself with yet another devaluation of the budget which would be worth at least a billion dry. Yet another in a long series that would bring the bank's capital to 7.9 billion today to contract, risking having to make yet another capital increase.
With the state expected to reopen its portfolio after it has already left the beauty of 5.9 billion loss since it entered the capital.
68% of the Treasury's share is now only worth 1 billion compared to the 6.9 billion with which the Treasury has recapitalized the Sienese bank.
If on the contrary the transaction took place, to favor the bank, at the balance sheet prices, then the bank would come out without damage, but Amco, that is, the State would have bought at off-market prices.
And if the recovery rates in the coming years were not amazing, then the loss from the sale would not have MPS, but directly Amco in the years to come.
One of the two actors (the majority shareholder state of Mps and the master state of Amco) would lose regardless. A game ending certainly not flattering.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tutti-i-prossimi-guai-di-mps/?utm_source=rss&utm_medium=rss&utm_campaign=tutti-i-prossimi-guai-di-mps on Sun, 07 Jun 2020 05:19:58 +0000.