Atlante (private equity fund)

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

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 bad loan to the fund.[1] UniCredit had about €20 billion net value of bad loan in the balance sheets as at 31 December 2015.[2] 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.[3]

It was reported that banking foundations, such as Fondazione Cariplo, Fondazione Cariparo, Compagnia di San Paolo[4] and Fondazione CRT,[5] which in previous banking reforms were forced to sell their banking subsidiaries (forced to diversify investments),[6] were invited to invest in the fund.[7][8] According to ACRI, the foundations had €40 billion shareholders' equity,[9] 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.[10]

On 29 April 2016 Quaestio announced that the fund had collected €4.249 billion from 67 investors including Cassa Depositi e Prestiti.[11]

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, means bad loan).[12] On average, the total NPLs to total loans ratio was 18%, the highest among European Union.

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 bad loans among the NPLs) in gross book value in that period.[12]

Bank Gross NPLs Gross NPLs / total loans ratio Net NPLs Net NPLs / total loans ratio Gross bad loans Gross bad loans / total loans ratio Net bad loans Net bad loans / total loans ratio Footnotes
UniCredit €79.760 billion 15.42% €38.920 billion 8.21% €51.089 billion 9.88% €19.924 billion 4.20% source: 2015 Annual Report[13]
Intesa Sanpaolo €63.114 billion 16.51% €33.086 billion 9.45% €39.150 billion 10.24% €14.973 billion 4.28% source: 2015 Annual Report[14]
BMPS €46.9 billion €24.154 billion 21.69% €26.627 billion €9.733 billion 8.74% source: 2015 Annual Report[15][16]
UBI Banca €13.434 billion 15.14% €9.689 billion 11.45% €6.988 billion 7.87% €4,287 billion 5.07% source: 2015 Annual Report[17]
Banco Popolare €20.645 billion 24.19% €14.057 billion 17.92% €14.786 billion 17.33% €6.458 billion 8.24%
Total €225 billion 18.3% €135 billion 11.0% source: Banca d'Italia[12]
Banca Popolare di Milano €5.997 billion 16.32% €3.624 billion 10.60% €3.276 billion 8.91% €1.785 billion 4.36% source: 2015 Annual Report[19]
Would become part of Banco BPM

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 bad loan in gross book value.[12] Banca Popolare dell'Emilia Romagna's gross NPLs to total loan ratio was 23.28% or €11.395 billion in size,[20]

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 bad loan.[12]

At the same time in order to boost the securitization of bad loan, Italian government had guarantee the senior tranche of the securitizated NPLs. (Garanzia sulla Cartolarizzazione delle Sofferenze),[21] which in line with the strict rule of state aid by the European Union, as junior tranche was excluding from the guarantee scheme. Usually the riskiest junior tranche would be re-purchased by the banks themselves. However, a plan to deposits all tranches was planned, which Atlante was aiming for junior tranches.

Additionally, the bail-out of Banca delle Marche, CariChieti, CariFerrara and Banca Etruria along, the four small-sized banks (definition of small: total assets between €21.5 billion and €3.6 billion), had to write-down €8.5 billion of bad loan 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 capital injection and recapitalization.

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 Supervisory Review and Evaluation Process (such as over 10% CET1 ratio for BMPS[23] and Banca Popolare di Vicenza[24]). 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[24] and €1 billion[25] respectively. BP Vicenza and Veneto Banca were under-written by UniCredit and Banca IMI (Intesa Sanpolo) respectively,[25] 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,[26] triggering a domino effect of causing UniCredit to recapitalize itself.

European Commission attitude towards state aid

In December 2015 European Commission ruled that the bail out of Banca Tercas by the Fondo Interbancario di Tutela dei Depositi (FITD in short; mandatory deposit guarantee fund) was a state aid. The commission also ruled that the aid affect the market effectiveness, thus the bank must returned the aid to the deposit guarantee fund. Any bail-out by the government must in-line with new Bank Recovery and Resolution Directive of the EU.

However, the bail-out of Banca delle Marche, CariChieti, CariFerrara and Banca Etruria by the government (though utilized the mandatory contribution of all Italian banks), also bail-in of shareholders and subordinated bond holders,[27] had cause public controversy that many bond holders were actually retail investors, making the Bank Recovery and Resolution Directive was unpopular as a tool to bail-out the bank. A private bail-out fund must be exist in order to solve the problem of the banking system. In early 2016, FITD added a voluntary scheme in its article of associations, which bail out Banca Tercas by voluntary contribution of the member banks of FITD.

Responses

Fitch Ratings announced that the contributions to the fund may weaken the large banks.[28]

Operations

First capital increase

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.[29] 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,[30] €100 million,[31] €60 million,[32] €50 million[33] and €20 million[34] respectively in the fund. On the following Monday, a €200 million investment from UBI Banca was announced.[35] On the same day UniCredit formally announced that the fund would be sub-underwriting the IPO of Banca Popolare di Vicenza.[36]

buying new shares

Atlante subscribed the entire capital increase of BPVi (for €1.5 billion) after Borsa Italiana rejecting the listing of the bank. Offer other than Atlante were voided after the listing in the Borsa was denied.[37] It was followed by purchasing most of the new shares of Veneto Banca (€988,582,329.50),[38] which some investors of the new shares other than Atlante, excised their rights to withdraw after the listing to the Borsa also failed.

buying NPLs

On 28 August 2016 Atlante employed Credito Fondiario as service provider in NPLs.[39]

On 29 July 2016 Atlante signed a memorandum of understanding to buy the mezzanine notes of the securitized bad loan portfolio of Banca Monte dei Paschi di Siena for €1.6 billion.[40] BMPS was the weakest banks among the 51 banks of 2016 European Union bank stress test.

Second capital increase

On 8 August 2016 Atlante II had raised €1.715 billion.[41]

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%).[42]

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[22]

References

  1. ↑ "UniCredit CEO Sees Putting Up to $1.1 Billion in Italy Bank Fund". Bloomberg. 15 April 2016. Retrieved 16 April 2016.
  2. ↑ "2015 Progetto Bilancio Consolidato" [2015 Draft Consolidated Reports and Accounts] (PDF) (in Italian). UniCredit. 22 March 2016. Retrieved 16 April 2016.
  3. ↑ "Press Release". UniCredit. 20 April 2016. Retrieved 20 April 2016.
  4. ↑ "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.
  5. ↑ "Fondazione Crt, deliberata adesione a fondo Atlante per 50 mln -fonte" (in Italian). Reuters. 18 April 2016. Retrieved 19 April 2016.
  6. ↑ "Intesa's top shareholder seeking adviser to sell 4 pct stake". Reuters. 7 October 2015. Retrieved 19 April 2016.
  7. ↑ "Italy's Atlas fund struggles to stop sky falling on banks". Reuters. 15 April 2016. Retrieved 15 April 2016.
  8. ↑ "Italy sets up bank rescue fund". BBC. 11 April 2016. Retrieved 15 April 2016.
  9. ↑ "VENTESIMO RAPPORTO SULLE FONDAZIONI DI ORIGINE BANCARIA 2014" (in Italian). ACRI. 28 September 2015. Retrieved 15 April 2016.
  10. ↑ "2014 Bilancio" (PDF) (in Italian). Fondazione Cariplo. 5 May 2015. Retrieved 16 April 2016.
  11. ↑ "Presentazione" [Presentation] (PDF) (in Italian). Quaestio Capital Management. 29 April 2016. Retrieved 1 May 2016.
  12. 1 2 3 4 5 "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.
  13. ↑ "2015 Progetto Bilancio Consolidato" [2015 Draft Consolidated Reports and Accounts] (PDF) (in Italian). UniCredit. 22 March 2016. Retrieved 16 April 2016.
  14. ↑ "2015 Annual Report". Intesa Sanpaolo. 2016. Retrieved 21 July 2016.
  15. ↑ "2015 Progetto di Bilancio" [2015 Draft Annual Report] (PDF) (in Italian). BMPS. 15 March 2016. Retrieved 17 April 2016.
  16. ↑ "Press release". BMPS. 4 July 2016. Retrieved 11 July 2016.
  17. ↑ "2015 Reports and Financial Statements" (PDF). UBI Banca. 2016. Retrieved 21 July 2016.
  18. ↑ http://www.gruppobancopopolare.it/media/sites/2/Annual-Report_2015.pdf
  19. ↑ http://www.gruppobpm.it/en-ist/baseItems/00/colonnaContainers/0/colonnaItems/0/linkItems/04/file/02_BILANCIO_BPM_2015_CON_UK_23-5-16.pdf
  20. ↑ "2015 Annual Report" (PDF). Banca Popolare dell'Emilia Romagna. 23 May 2016. Retrieved 21 July 2016.
  21. ↑ "Definito lo strumento per facilitare lo smaltimento delle sofferenze bancarie" (in Italian). Ministry of Economy and Finance. 27 January 2016. Retrieved 16 April 2016.
  22. ↑ "List of supervised entities" (PDF). European Central Bank. 1 January 2016. Retrieved 13 April 2016.
  23. ↑ "BOARD APPROVES RESULTS AS AT 31 DECEMBER 2015" (PDF). Banca Monte dei Paschi di Siena. 5 February 2016.
  24. 1 2 "BANCA POPOLARE DI VICENZA: SHAREHOLDERS' MEETING" (PDF). Banca Popolare di Vicenza. 26 March 2016. Retrieved 16 April 2016.
  25. 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.
  26. ↑ "UniCredit could delay Popolare di Vicenza cash call-sources". Reuters. 31 March 2016. Retrieved 15 April 2016.
  27. ↑ "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.
  28. ↑ "Fitch: Italy Rescue Fund Highlights Large Bank Contingency Risks". Fitch Ratings. 13 April 2016. Retrieved 18 April 2016.
  29. ↑ "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.
  30. ↑ "ADESIONE AL PROGETTO ATLANTE" (PDF) (in Italian). Banca Popolare di Milano. 15 April 2016. Retrieved 19 April 2016.
  31. ↑ "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.
  32. ↑ "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.
  33. ↑ "PRESS RELEASE" (PDF). Banca Monte dei Paschi di Siena. 15 April 2016. Retrieved 18 April 2016.
  34. ↑ "PRESS RELEASE" (PDF). Banca Carige. 15 April 2016. Retrieved 18 April 2016.
  35. ↑ "Press Release" (PDF). UBI Banca. 18 April 2016. Retrieved 19 April 2016.
  36. ↑ "Press Release". UniCredit. 18 April 2016. Retrieved 19 April 2016.
  37. ↑ "BANCA POPOLARE DI VICENZA: COMPLETED GLOBAL OFFERING. OFFER PRICE SET AT EURO 0.10 PER SHARE" (PDF). Banca Popolare di Vicenza. 30 April 2016. Retrieved 1 May 2016.
  38. ↑ "COMUNICATO STAMPA" (PDF) (in Italian). Quaestio Capital Management SGR. 30 June 2016. Retrieved 9 August 2016.
  39. ↑ "QUAESTIO CAPITAL MANAGEMENT SGR RAFFORZA LA STRUTTURA PER I NPL" (PDF) (in Italian). Quaestio Capital Management SGR. 28 July 2016. Retrieved 9 August 2016.
  40. ↑ "Structural and definitive solution to the bad loan legacy portfolio" (PDF). BMPS. 29 July 2016. Retrieved 1 August 2016.
  41. ↑ "IL FONDO ATLANTE II RAGGIUNGE LA DIMENSIONE PER AVVIARE LA SUA OPERATIVITA'" (PDF) (in Italian). Quaestio Capital Management SGR. 8 August 2016. Retrieved 9 August 2016.
  42. ↑ "Società" (in Italian). Quaestio Capital Management SGR. Retrieved 19 April 2016.
  43. ↑ "Presentation of 1Q16 Results". Intesa Sanpaolo. 6 May 2016. Retrieved 17 May 2016.
  44. ↑ "Adesione al progetto Atlante" (in Italian). Banca Popolare di Sondrio. 18 April 2016. Retrieved 20 August 2016.
  45. ↑ "ASSIGNMENT OF CORPORATE OFFICES; PARTICIPATION IN THE ATLANTE PROJECT" (PDF). Cattolica Assicurazioni. 20 April 2016. Retrieved 24 April 2016.

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