Henry Novelli

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Henry Novelli

Culture Blog - Aug 27, 2017

BMPS: the european commision has approved the resctructuring plan 2017 – 2021

The hoped-for approval has finally come. Monte dei Paschi di Siena will now start to implement the heavy restructuring plan that could turn the bank profitable in 3 years’ time.

The industrial plan is focused on the disposal of bad loans for a total of €28.6 billion, of which €26.1 billion  will be through a securitization vehicle, while €2.5 billion of unsecured positions will be through a dedicated procedure. The bad loans’ portfolio will be sold to Atlante II (Junior and mezzanine positions) at a price of 21% of face value. The foreseen net profit will be higher than €1.2 billion by 2021. The overall bank efficiency will be at stake during the industrial plan implementation. Everyone knows this is the last chance Monte dei Paschi has to overcome its endless financial crisis.

The bank is aiming at relaunching the retail clients and small business through an even more simplified and digitalized service.
Greater weight will be given to Widiba (the online bank of MPS) as a digitalization, innovation and automation channel to greatly reduce the cost to serve. Another hot topic will be the complete redesign of the distribution network with the consequent reduction of the bank’s branches (from 2,000 in 2016 to 1,400 of 2021) as well as the reduction of the number of employees of about 5,500 units.

The risk related to impaired credit position will be automatically tracked through an early detection system that will improve considerably the default rate as well as solve the past due situations. A specific business unit will be created that will focused on early remedial actions/restructuring and control of such positions. Monte dei Paschi will proceed in the disposal of non-core/strategic activities: disposal of foreign banks, disposal of part of its company’s participations and part of the real estate assets. There will be a ban on making acquisitions as well as a salary cap corresponding to 10 times the average employee wage working at the bank.

Going back to the disposal of the current NPL portfolio, the price of sale is €5.5 billion equal to 21% of gross book value, while the accounting value is equal to €9.4 billion. The difference of €3.9 billion will be accounted in the first semester of this year while the de-consolidation of the portfolio is expected for June 2018. Monte dei Paschi di Siena will get an earn out equal to 50% of the extra amount realized on Junior title superior to 12% per year. The maximum budget to be allocated as state aid was quantified to €3.9 billion while the remaining €4.3 billion is part of the burden-sharing that will determine an asset consolidation of €8.1 billion total. Monte dei Paschi di Siena’s restructuring plan started after the failure of the capital increase in December 2016 and it takes almost 7 months to prepare it and get its approval.