Italy seeks buyers as it prepares to break up Veneto banks -sources


Reuters

* Italy to sell healthy assets of Veneto lenders -sources
    * Intesa Sanpaolo seen as most likely bidder -sources
    * Soured loans to be moved to "bad bank", part-funded by the
state

    By Silvia Aloisi and Gianluca SemeraroMILAN, June 20 (Reuters) - Italy has hired Rothschild to
find buyers for the best assets of two ailing Veneto-based
lenders, with Intesa Sanpaolo <ISP.MI> viewed as the most likely
taker, said several sources close to the situation.
    The move is part of a new plan by the Rome government that
envisages the effective liquidation of Banca Popolare di Vicenza
[BPVS.UL] and Veneto Banca [VBANC.UL] with the help of state
money to reduce losses for the lenders' private investors.
    Rome is scrambling to prevent the two banks from being wound
down under European banking rules that would impose losses on
senior bondholders and large depositors before taxpayer money
can be used -- a politically unpalatable prospect ahead of
national elections next year.
    Instead the government is working on a hybrid plan that
would split the two lenders' assets into "bad" and "good" banks.
The bad bank would take on their soured debts and be financed
partly with state money, with junior bondholders and
shareholders also taking a hit, two sources said.
    Pressure has been mounting on Italy to resolve the Veneto
banks problem, particularly since Spain'sBanco Popular <POP.MC>
was rescued by Santander <SAN.MC> this month. [nL8N1J514A]
    Intesa Sanpaolo, Italy's top retail bank, is considering
buying the healthier parts of the two Veneto banks. However,
Intesa wants to pay as little as possible to avoid having to
launch a capital increase or backtrack on its dividend policy,
said two other sources close to the matter.
    The Iccrea group of cooperative lenders is also looking at
the assets but is seen as a less likely candidate, while
UniCredit <CRDI.MI> has ruled itself out, these sources said.
    Details of the scheme remain sketchy and it is not clear
whether the European Commission, which must authorise the use of
state aid, would allow the plan to proceed.
    The Italian treasury, Rothschild and the Commission declined
to comment.

    LOOPHOLE
    Rome is hoping to take advantage of a loophole in European
rules that allows the use of routine insolvency proceedings with
banks not considered systemically important, allowing the
process to be handled by the member state rather than the banks
being wound down by EU authorities.
    The two Veneto banks have a combined market share of only 3
percent at the national level, with loans totalling about 40
billion euros. They had planned to merge, creating Italy's
eighth-biggest bank by assets.
    "There will not be a (European) resolution because the
process will be managed at the national level," said one of the
sources, speaking on condition of anonymity because the
negotiations are confidential.
    "State money will be used to help fund the asset management
company that will take on the bad assets of the two banks. The
good assets will be sold in an auction."
     An announcement should be made this week or next, the
source added.
    A second source confirmed that the plan involved the sale of
some assets and the use of state money.
    "What is certain is that there won't be a bail-in. That is
to say senior bondholders and depositors will not be hit."
    The two banks had initially asked for a state bailout to
plug a capital gap of 6.4 billion euros ($7.13 billion) under a
European scheme known as precautionary recapitalisation, which
allows the temporary use of taxpayer money to rescue lenders
that are deemed viable.
    But that plan floundered because the European Commission
demanded that private investors pump 1.25 billion euros into the
two banks before state aid could be disbursed.
    With no willing investors, Rome had to come up with an
alternative solution to avoid the risk of European authorities
pulling the plug on the two banks on their own terms.
($1 = 0.8975 euros)


 (Additional reporting by Francesca Landini, Valentina Za and
Andrea Mandala; Editing by David Goodman)
 ((silvia.aloisi@thomsonreuters.com; +39 02 6612 9723; Reuters
Messaging: silvia.aloisi.thomsonreuters.com@reuters.net))

Keywords: EUROZONE BANKS/ITALY VENETOBANKS



This article appears in: Stocks , Banking and Loans , Politics
Referenced Symbols: CRDI , ISP , POP , SAN


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