5,500 MPS lay-offs, 28.6 bn NPLs to shed (3)

EU plan sees 1.2 bn net profit in 2021

(ANSA) - Rome, July 5 - The Monte dei Paschi di Siena (MPS) restructuring plan sees 5,500 lay-offs over 2017-2021 with some 600 of the current 2,000 branches closing, sources said Wednesday. MPS's net profit will be over 1.2 billion euros in 2021, according to the plan. The junior and mezzanine tranches of non-performing loans will be sold to the Atlante 2 fund at 21% of their gross value, and 28.6 billion euros in NPLS are to be shed in all, the plan said. CEO Marco Morelli said "this is an important turning point, a milestone to get MPS back onto a growth track". Trade unions said they were happy that lay-offs would be on a voluntary basis. MPS will probably return to the Milan bourse this autumn, sources said.
    The European Commission on Tuesday approved 5.4 billion euros in State aid for the precautionary recapitalisation of MPS after the in-principle accord reached on June 1 by Economy Minister Pier Carlo Padoan and Competition Commissioner Margrethe Vestager.
    Padoan, for his part, said that the MPS rescue plan was a turning point for the Italian banking system and that the Treasury would take up its 70% stake in July.
    A statement from the EC said: "The two conditions for this agreement are now both fulfilled, namely the European Central Bank has confirmed that MPS is solvent and meets capital requirements, and Italy has obtained a formal commitment from private investors to purchase the bank's non-performing loan portfolio." The Commission said that in order to approve Italy's support for the troubled Tuscan lender, "MPS's shareholders and junior creditors have contributed ª4.3 billion to limit the use of taxpayer money as required by EU state aid rules".
    The restructuring of MPS will be completed in five years during which the bank plans to "re-orient its business model towards retail customers and small and medium-sized businesses, strengthen its efficiency and improve its credit risk management", the Commission said.
    As part of this, MPS's senior management will be subject to a salary cap of 10 times the average salary of MPS employees.
    Another key element of the plan, the EC said, is the disposal of a 26.1-billion-euro non-performing loan portfolio on market terms by transferring it to a privately-funded special vehicle.
    This operation will be partially funded by the Atlante II fund.
    MPS will also sell the lower risk senior notes of the vehicle to private investors.
    To facilitate this sale, it will apply for State guarantees on market terms for the senior tranche under an Italian State guarantee scheme (the so-called "GACS", an aid-free scheme approved by the Commission in February 2016).
    Padoan, for his part, told a Rome press conference that the rescue of MPS is "an extremely important element for the bank and the Italian banking system and a further turning point after last week's deal on the Veneto banks".
    "It's a plan that gives certainties, a sustainable timeframe for the bank which will have a very important level of capital".
    The Treasury will have a 70% stake in MPS after the bank's precautionary recapitalisation, Padoan said.
    Ministry official Alessandro Rivera said the operation will be 8.1 billion overall and the Treasury will underwrite a 3.9 billion hike by the end of July, while 1.5 billion will be used to buy back junior bonds in the autumn after burden sharing has been applied, for a final disbursement of 5.3 billion euros.
    The restructuring plan "gives certainties" and "a credible horizon" for the bank which will have "an important level of capital and will shed almost all its non-performing loans, for a gross value of more than 28 billion euros, by the first half of 2018", Padoan said.
    The MPS rescue has enabled Italy "not to offload the cost of bail-outs onto taxpayers," Padoan said, by envisaging a "limited use" of public resources.
    Padoan said he was "confident public money will not only be recovered, but there will also be a bonus" as Monte dei Paschi di Siena improves over the years following its rescue.
    Padoan said he had the "utmost confidence" in the current top management of Monte dei Paschi di Siena, when asked if they will be confirmed.
    The rescue ends "an 'annus horribilis', which started in June of last year with the stress test, we had the total awareness we were at the epicentre of the Italian, and not only Italian, banking crisis", MPS President Alessandro Falciai said, vowing that "the bank will be very flourishing" and "among the most solid in the EU".
    There will be no firings in the restructuring of MPS, CEO Marco Morelli said.
    The State will exit the bank's capital in 2021, Falciai said.
   

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