Mps goes to zero on the stock market. ECB: ‘capital hinders marriage’ – Economy

Mps starts from scratch in an (almost) literal sense. The shares of the oldest bank in the world, in the last trading session before the start of the 2.5 billion euro capital increase, recorded a new collapse, spending most of the session unable to trade and closing with a splash of 42% to 9.9 euros.

Pulverized to 99 million euros, less than the 125 million of very high commissions that it will pay to the banks of the guarantee consortium, the value of Monte, which just five years ago had been recapitalized with over 8 billion, of which 5.4 from taxpayers, and which in the last 11 years has asked the market, excluding the 2.5 of the increase in progress, 18.5 billion, burning them all.

The hyper-dilutive nature of the operation that will start on Monday and will put 374 shares on the market for every 3 in circulation, at a price of 2 euros each, weighs on the collapse. When the stock market reopens, the securities will start trading at a price of 2.063 euros due to the detachment of an option right which is worth 7.837 euros. Consob, after having authorized the prospectus, warned of the “risk” of “a strong volatility of the share price” which could lead to an “overestimation of the market price” compared to the “theoretical value”. To contain these anomalies, the ‘rolling’ method was adopted, which will allow arbitrage aimed at realigning the price of the shares traded on the Stock Exchange to that expressed through the rights.

In the meantime, elements and risks of the operation emerge from the prospectus, the success of which is however protected by a consortium of eight banks and Algebris, which will guarantee the unexercised potential (857 million euros, compared to the 1.6 billion that the Treasury has is committed to injecting and of the 37 million promised by a handful of investors). The guarantors will receive € 125 million, an amount equal to 14.6% of the part of the increase covered by the guarantee, in part to be allocated to the sub-guarantors – including Axa, Denis Dumont, some funds exposed on subordinates – on which they have paid approximately 500 million risk on the unopted.

The maxi-commission will have a negative impact of 15 basis points on the capital targets planned for 2024 by Mps, which estimates a Tier1 ratio at 14.2%, 150 basis points below the current average of significant Italian banks. and 70 points below the European average, notes the ECB. “The persistence of this gap, in the long term, could represent a possible obstacle to future merger operations with an industrial partner”, is the warning that the Supervisory Authority issued to Mps in the draft Srep decision reported in the prospectus, raising doubts about the adequate capitalization of the bank even after the increase.

Increase which, moreover, “represents the essential prerequisite, together with the implementation of the 2022-2026 industrial plan” for “maintaining” the business continuity. And if the “high execution risk” of the recapitalization can be said to be overcome thanks to the underwriting syndicate, the implementation of the plan will have to slalom with a series of obstacles, such as the “spread tensions” that can raise the cost of funding. , the risks of success of commercial initiatives that must support the growth of commissions, an increase in non-performing loans due to the economic situation and legal risks beyond the “full control” of the bank.

“The ability of Mps to generate robust and stable profitability – warns the Supervisory Authority – will only be achieved if, after the execution of the capital increase, the management is able to achieve all the objectives of the new plan in due time, demonstrating in the course a sufficiently extended period of time that the structural weaknesses have been definitively overcome “. The challenge for CEO Luigi Lovaglio, who is credited with starting the increase in extremely difficult conditions, has just begun.