Brussels (Brussels Morning) Italy’s second-largest bank, UniCredit, announced on Thursday evening that it has signed a deal with the Italian Treasury on guidelines for a potential takeover of the troubled Monte dei Paschi (MPS) bank, months after initial talks seemed to have fallen through.
The announcement was followed by news that its Q2 profits will exceed projections, which boosted the share prices of both banks in Friday trading.
Most analysts were surprised by the deal, as they expected UniCredit’s new CEO Andrea Orcel to focus on internal restructuring. The takeover plans were facing significant opposition from the bank’s investors as recently as January this year, but the Italian government has meanwhile been seeking a way to sell off its stake in MPS.
The most recent plan, revealed to Reuters by government sources, would spin off the ailing bank’s legal risks into a separate entity, the aim being to reduce legal liabilities to less than 5 billion euro – half the current amount.
MPS, the world’s oldest continually-operating bank, was rescued by a 5.4 billion euro government bailout in 2017, making Italy the owner of a 64% stake in the lender. Rome soon started seeking a path to divest from the bank, a task that proved near impossible, given the bank’s significant liabilities.
While few details were provided about the Treasury deal, UniCredit stated it would only take over “selected parts” of MPS, corroborating the reports that the government plans to spin off the bank’s liabilities.
According to Orcel, negotiations will take place over the following weeks, with the final decision likely to be reached mid-September. Should the government retain the bank’s legal risks, it will first need to seek approval from the European Commission’s antitrust authorities, since such a move would be tantamount to a form of state aid.