Atlante (private equity fund)

Atlante is an Italian private equity fund that dedicated to recapitalize some Italian banks, as well as purchase the securitizated junior non-performing loans.

On Friday 15 April 2016 Intesa Sanpaolo had announced that the bank would invest €800 million to €1,000 million to the fund, with the total size of the fund would varies from €4 billion to €6 billion.[1] On the same day Banca Popolare di Milano, Banca Popolare dell'Emilia Romagna, Credito Valtellinese, Banca Monte dei Paschi di Siena, Banca Carige announced that the bank would invested €100 million,[2] €100 million,[3] €60 million,[4] €50 million[5] and €20 million[6] respectively in the fund. On the following Monday, a €200 million investment from UBI Banca was announced.[7] On the same day UniCredit formally announced that the fund would be sub-underwriting the IPO of Banca Popolare di Vicenza.[8] On 20 April Cattolica Assicurazioni's €40 million investment was announced.[9]

According to Federico Ghizzoni, the CEO of UniCredit, despite the bank may inject €1 billion to the fund, the bank had a priority to sell their sofferenze to the fund.[10] UniCredit had about €20 billion net value of sofferenze in the balance sheets as at 31 December 2015.[11] Moreover, both UniCredit and Intesa Sanpaolo (via Banca IMI) were already under-written Banca Popolare di Vicenza and Veneto Banca for a combined €2.5 billion capital increases. The contributions of the fund would make the fund becoming the buyer of the unsold shares, instead of the banks themselves. As BPVi announced that the new shares would priced between €3 to €0.1 per shares, the fund on behalf of UniCredit would purchase the unsold share for €0.1 only.[12]

It was reported that bank foundations, such as Fondazione Cariplo, Fondazione Cariparo, Compagnia di San Paolo[13] and Fondazione CRT,[14] which in previous banking reforms were forced to sell their banking subsidiaries (forced to diversify investments),[15] were invited to invest in the fund.[16][17] According to ACRI, the foundations had €40 billion shareholders' equity,[18] with most of them no longer owning their banks in majority or entirely sold. Fondazione Cariplo, a shareholder of Intesa Sanpaolo and the management firm of the fund, had a shareholders' equity of €8.9 billion.[19]

On 29 April 2016 Quaestio announced that the fund had collected €4.249 billion from 67 investors including Cassa Depositi e Prestiti.[20]

Backgrounds

Bad debts crisis of Italy

The Italian banking sector was suffer from the impact of the recession of the country. According to Banca d'Italia (the central bank), the non-performing loans (NPLs) of the whole banking system stood at €360 billion gross book value in December 2015 (peaked in September 2015) with more than half were sofferenze (€210 billion, sofferenze was not equal to the harmonized definition of bad debt, defined by European Banking Authority in January 2015).[21] The 5 largest banking group (by total assets), namely: UniCredit, Intesa Sanpaolo, Banca Monte dei Paschi di Siena (BMPS), UBI Banca and Banco Popolare, had €225 billion of NPLs (€135 billion were sofferenze among the NPLs) in gross book value in that period.[21] According to 2015 annual report, UniCredit had a gross book value of €79.760 billion of NPLs at 31 December 2015, or €38.920 billion after write-down.[11] The amount of sofferenze (equal to harmonized definition of bad debt) after write-down was €19.924 billion at 31 December 2015 (€51.089 billion in gross).[11] During the year UniCredit also sold a subsidiary now known as doBank to a private equity fund, which including a gross book value of €2.4 billion NPLs portfolio.[11] BMPS had a gross book value of sofferenze (ditto.) for €26.627 billion and €9.733 billion in net.[22]

While among the large to medium banks (total assets larger than €21.5 billion, minus the top 5 banks[nb 1]) had a total NPLs of €76 billion and €41 billion sofferenze in gross book value.[21] Banca delle Marche, CariChieti, CariFerrara and Banca Etruria, the four small-sized banks (definition of small: total assets between €21.5 billion and €3.6 billion) that were rescued on 22 November 2015, had written down €8.5 billion of sofferenze to €1.5 billion (and transferred to a "bad bank", REV - Gestione Crediti, a company without banking license, in early 2016), causing Italian National Resolution Fund for about €3.6 billion to bail out[23] (the amounts "bailed-in" by the shareholders and subordinated bond holders, were not know) The fund was sourced from mandatory contributions of the whole banking system, following the enforcement of the new Bank Recovery and Resolution Directive of the EU in Italy in 2014.[23] However, the bail out also overdraw future contributions of the banks as the annual contributions of 2014 were not enough for the bail out.

If including the data from large to micro banks (whole system minus top 5 banks), the gross book value of NPLs was €135 billion, €75 billion of them were sofferenze.[21]

At the same time in order to boost the securitization of sofferenze, Italian government had guarantee the securitizated senior bad debts. (Garanzia sulla Cartolarizzazione delle Sofferenze),[24] which in line with the strict rule of state aid by the European Union, as junior loan was excluding from the guarantee scheme.

New shares facing low demands

Moreover, among the first 14 largest Italian banks that were supervised by European Central Bank directly,[nb 2] they were required a higher CET1 ratio after asset quality review (such as over 10% CET1 ratio for BMPS[26] and Banca Popolare di Vicenza[27]). In 2015 banks such as BMPS (for about €3 billion) and Banca Carige were recapitalized. In 2016 three of the aforementioned 14 banks, Banco Popolare, Banca Popolare di Vicenza and Veneto Banca, also announced the plan of recapitalization of €1 billion, €1.5 billion[27] and €1 billion[28] respectively. BP Vicenza and Veneto Banca were under-written by UniCredit and Banca IMI (Intesa Sanpolo) respectively,[28] the two largest banks of Italian banking system. However, as most of the banks were under-capitalized, market capitalization under their value of net equity, plus low profit margin, making the new shares of BP Vicenza may purchased by UniCredit entirely due to low demand,[29] triggering a domino effect of causing UniCredit to recapitalize itself.

Responses

Fitch Ratings announced that the contributions to the fund may weaken the large banks.[30]

Management

The fund was managed by Quaestio Capital Management SGR S.p.A., a wholly owned subsidiary of Quaestio Holding S.A., which was owned by Fondazione Cariplo (37.65%), Fondazione Cassa dei Risparmi di Forlì (6.75%), Cassa Italiana di Previdenza e Assistenza dei Geometri liberi professionisti (18%), Locke S.r.l. (22%) and Direzione Generale Opere Don Bosco (15.60%).[31]

Stakeholders

Footnotes

  1. ↑ Banca d'Italia did not disclose the full list, but roughly equal to 9 others banks that were supervised by European Central Bank directly, plus BNL, Cariparma, Crediop, Deutsche Bank S.p.A. (subsidiaries of foreign banking group), Banca Mediolanum and Credito Valtellinese
  2. ↑ The top 5, plus Mediobanca, Banca Popolare dell'Emilia Romagna, ICCREA Holding, Banca Popolare di Milano, Banca Popolare di Vicenza, Banca Carige, Veneto Banca, Banca Popolare di Sondrio and Credito Emiliano[25]

References

  1. ↑ "INTESA SANPAOLO PARTECIPA AL FONDO ATLANTE PER LA SOLUZIONE STRUTTURALE AI CREDITI IN SOFFERENZA DEL SISTEMA BANCARIO ITALIANO" [INTESA SANPAOLO PARTICIPATES IN THE ATLANTE FUND TO REACH STRUCTURAL SOLUTION FOR NPLs OF ITALIAN BANKING SYSTEM] (in Italian). Intesa Sanpaolo. 15 April 2016. Retrieved 15 April 2016.
  2. ↑ "ADESIONE AL PROGETTO ATLANTE" (PDF) (in Italian). Banca Popolare di Milano. 15 April 2016. Retrieved 19 April 2016.
  3. ↑ "GRUPPO BPER: impegno di investimento in quote del Fondo Atlante per un importo pari a € 100 milioni" (PDF) (in Italian). Banca Popolare dell'Emilia Romagna. 15 April 2016. Retrieved 18 April 2016.
  4. ↑ "FONDO ATLANTE, VALUTAZIONE POSITIVA DELL’INIZIATIVA DA PARTE DEL CONSIGLIO DI AMMINISTRAZIONE DI CREVAL PARTECIPAZIONE ALL’INIZIATIVA CON UN IMPEGNO DI 60 MILIONI DI EURO" (PDF) (in Italian). Credito Valtellinese. 15 April 2016. Retrieved 19 April 2016.
  5. ↑ "PRESS RELEASE" (PDF). Banca Monte dei Paschi di Siena. 15 April 2016. Retrieved 18 April 2016.
  6. ↑ "PRESS RELEASE" (PDF). Banca Carige. 15 April 2016. Retrieved 18 April 2016.
  7. ↑ "Press Release" (PDF). UBI Banca. 18 April 2016. Retrieved 19 April 2016.
  8. ↑ "Press Release". UniCredit. 18 April 2016. Retrieved 19 April 2016.
  9. ↑ "ASSIGNMENT OF CORPORATE OFFICES; PARTICIPATION IN THE ATLANTE PROJECT" (PDF). Cattolica Assicurazioni. 20 April 2016. Retrieved 24 April 2016.
  10. ↑ "UniCredit CEO Sees Putting Up to $1.1 Billion in Italy Bank Fund". Bloomberg. 15 April 2016. Retrieved 16 April 2016.
  11. 1 2 3 4 "2015 Progetto Bilancio Consolidato" [2015 Draft Consolidated Reports and Accounts] (PDF) (in Italian). UniCredit. 22 March 2016. Retrieved 16 April 2016.
  12. ↑ "Press Release". UniCredit. 20 April 2016. Retrieved 20 April 2016.
  13. ↑ "Fondo Atlante, già 3,4 miliardi in arrivo da banche, fondazioni, Cdp Intesa Sanpaolo cederà sofferenze". Corriere della Sera (in Italian). 17 April 2016. Retrieved 19 April 2016.
  14. ↑ "Fondazione Crt, deliberata adesione a fondo Atlante per 50 mln -fonte" (in Italian). Reuters. 18 April 2016. Retrieved 19 April 2016.
  15. ↑ "Intesa's top shareholder seeking adviser to sell 4 pct stake". Reuters. 7 October 2015. Retrieved 19 April 2016.
  16. ↑ "Italy's Atlas fund struggles to stop sky falling on banks". Reuters. 15 April 2016. Retrieved 15 April 2016.
  17. ↑ "Italy sets up bank rescue fund". BBC. 11 April 2016. Retrieved 15 April 2016.
  18. ↑ "VENTESIMO RAPPORTO SULLE FONDAZIONI DI ORIGINE BANCARIA 2014" (in Italian). ACRI. 28 September 2015. Retrieved 15 April 2016.
  19. ↑ "2014 Bilancio" (PDF) (in Italian). Fondazione Cariplo. 5 May 2015. Retrieved 16 April 2016.
  20. ↑ "Presentazione" [Presentation] (PDF) (in Italian). Quaestio Capital Management. 29 April 2016. Retrieved 1 May 2016.
  21. 1 2 3 4 "Rapporto sulla stabilità finanziaria N°1 - 2016" [Financial Stability Report N°1 - 2016] (PDF) (in Italian). Banca d'Italia. 29 April 2016. Retrieved 1 May 2016.
  22. ↑ "2015 Progetto di Bilancio" [2015 Draft Annual Report] (PDF) (in Italian). BMPS. 15 March 2016. Retrieved 17 April 2016.
  23. 1 2 "Informazioni sulla soluzione delle crisi di Banca Marche, Banca Popolare dell'Etruria e del Lazio, CariChieti, Cassa di Risparmio di Ferrara" [Information on resolution of Banca Marche, Banca Popolare dell'Etruria e del Lazio, Carichieti, and Cassa di Risparmio di Ferrara crises] (in Italian). Banca d'Italia. 22 November 2015. Retrieved 8 March 2016.
  24. ↑ "Definito lo strumento per facilitare lo smaltimento delle sofferenze bancarie" (in Italian). Ministry of Economy and Finance. 27 January 2016. Retrieved 16 April 2016.
  25. ↑ "List of supervised entities" (PDF). European Central Bank. 1 January 2016. Retrieved 13 April 2016.
  26. ↑ "BOARD APPROVES RESULTS AS AT 31 DECEMBER 2015" (PDF). Banca Monte dei Paschi di Siena. 5 February 2016.
  27. 1 2 "BANCA POPOLARE DI VICENZA: SHAREHOLDERS' MEETING" (PDF). Banca Popolare di Vicenza. 26 March 2016. Retrieved 16 April 2016.
  28. 1 2 "ORDINARY SHAREHOLDERS' MEETING AND TIMELINE FOR SHARE-CAPITAL INCREASE AND LISTING ON THE STOCK MARKET" (PDF). Veneto Banca. 18 March 2016. Retrieved 16 April 2016.
  29. ↑ "UniCredit could delay Popolare di Vicenza cash call-sources". Reuters. 31 March 2016. Retrieved 15 April 2016.
  30. ↑ "Fitch: Italy Rescue Fund Highlights Large Bank Contingency Risks". Fitch Ratings. 13 April 2016. Retrieved 18 April 2016.
  31. ↑ "Società" (in Italian). Quaestio Capital Management SGR. Retrieved 19 April 2016.
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