MILAN (Reuters) – Shareholders of Monte dei Paschi di Siena BMPS.MI on Sunday approved a long-awaited bad debt cleanup plan aimed at facilitating the sale of the state bank to a healthier rival.
Italy worked for two years on the plan, which got final approval from the European Central Bank in September and is due to be completed by December 1.
Rome bailed out Monte dei Paschi in 2017, acquiring a 68% stake for 5.4 billion euros ($ 6.3 billion). To meet the conditions agreed at the time with the European Union’s competition authorities, it must reduce this stake before the bank approves the 2021 results.
The “Hydra” program approved on Sunday at an extraordinary general meeting will reduce Monte dei Paschi’s doubtful loans to 4.3% of total loans, below that of UniCredit. CRDI.MI 4.8%, currently the best level among large commercial banks.
The move was intended to facilitate a merger, but the Treasury is struggling to find buyers for the loss-making bank, people familiar with the matter said.
Under the “Hydra” program, Monte dei Paschi will transfer 8.1 billion euros of bad loans to the state-owned bad debt manager AMCO, as well as other assets and liabilities, of which 1.1 billion euros. euros of capital.
The deal, which includes a € 3.2 billion bridging loan from UBS and JPMorgan banks, allowed Monte dei Paschi to forgo the loans without incurring losses.
However, the ECB asked the bank to replenish its capital buffers, a condition the Treasury had hoped to fulfill by finding a buyer by the end of the year.
Closing such a deal will take more time, however, as incentives to attract potential buyers will need to be negotiated, sources said.
The ruling Five Star Movement has called on the state to keep the MPS and Prime Minister Giuseppe Conte has yet to sign the decree needed to complete the bad loans spin-off.
($ 1 = € 0.8537)
Report by Valentina Za and Giuseppe Fonte; Editing by Crispian Balmer