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 The clash between management and its biggest shareholder, the
Fondazione Monte dei Paschi, highlights flaws in the ownership
structure of many Italian lenders just as they prepare for the euro
zone's industry-wide health checks.
The International Monetary Fund has already called Monte dei Paschi,
the country's third-biggest lender behind Intesa Sanpaolo and
UniCredit, a "systemic bank" and said the success of its
restructuring is critical for Italian banks as a whole.
"The foundation's behavior is further evidence of the problems
linked to the inadequate ownership structure of our banking system,"
Luigi Guiso, an economics professor at the European University
Institute in Florence, said in an article written for independent
think-tank lavoce.info.
"Not only does it risk burning the foundation's few remaining assets
but also, and this would be a lot more serious, it risks triggering
a crisis at Monte dei Paschi and sowing seeds of instability for the
whole banking system."
Foundations like Monte dei Paschi's are major shareholders in all of
Italy's main banks, with a combined stake of around 25 percent in
Intesa Sanpaolo and 12 percent in Unicredit.
Altogether there are 88 banking foundations in Italy which in the
good times used dividends from the lenders to fund social and
cultural projects.
But as dividends have dried up and coffers depleted some now find
themselves unable to take part in a string of cash calls already
planned by the banks and this year's industry-wide health tests to
be conducted by the European Central Bank are only expected to lead
to more share issues.
Besides Monte dei Paschi, Genoa-based Banca Carige has been trying
for months to sell its insurance assets to plug at least some of an
800 million-euro capital shortfall by March, and avoid a big share
offering.
Carige's top investor is also a cash-strapped foundation, with a 47
percent stake. Smaller Banca Marche, controlled by three foundations
with a combined 56 percent stake and placed under special
administration by the Bank of Italy last year, is also seeking 500
million euros to fix its balance sheet.
In Monte dei Paschi's case, the foundation ran up big debts to keep
a sizeable stake when the bank tapped the market for cash in 2008
and 2011 to restore its finances, badly stretched by the costly
purchase of smaller rival Antonveneta.
That deal was the brainchild of Monte dei Paschi's former chief
Giuseppe Mussari, previously head of the foundation.
Now the bank has been forced to postpone its latest rights issue
until mid-2014 after the foundation used its 33.5 percent holding to
vote down the management proposal for an immediate cash call.
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The foundation is putting its need to repay large debts before the
bank's wider interest, critics say.
The foundation says a share issue as early as January would
essentially force it to shut down as it would dilute the value of
its existing stake, which it needs to sell down to pay off debts of
some 340 million euros. Also bankers say if the current share price
falls below 0.128 euros the creditors could seize the entire stake.
NATIONALISATION
The rights issue is a key plank of a restructuring plan imposed by
the European Commission which requires repayment of last year's 4.1
billion-euro state bailout or its conversion to equity — effectively
nationalization.
Trade unions and even some politicians in Siena, where the bank is
known as "Daddy Monte" and is the largest private employer, are not
wholly averse to such an outcome.
The foundation, which has close ties to politicians in Siena, says
it does not want the bank to fall under state control but needs more
time to find a buyer for part or all of its existing stake in the
bank.
But the bank's Chairman Alessandro Profumo and Chief Executive
Fabrizio Viola have said postponing the fundraising will cost the
bank dearly and make it harder as it is likely to coincide with cash
calls by other Italian banks.
Both have threatened to resign at the board meeting on January 14
which is also set to discuss the possibility of challenging the
foundation's stance in court.
Meanwhile the foundation has denied suggestions that it is
discussing a deal with other banking foundations led by Cariplo — a
major shareholder in Intesa Sanpaolo.
Under this plan, which industry sources say is backed by the Italian
treasury, the Monte dei Paschi foundation would sell the bulk of its
holding to other foundations or swap it for stakes in other banks
that are easier to sell on the market.
($1=0.7361 euros)
(Additional reporting by Gianluca
Semeraro; editing by Greg Mahlich)
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