Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Banco BPM close to bad loan deal with Credito Fondiario/Elliott - sources

Published 10/12/2018, 22:26
Updated 10/12/2018, 22:31
© Reuters.  Banco BPM close to bad loan deal with Credito Fondiario/Elliott - sources

© Reuters. Banco BPM close to bad loan deal with Credito Fondiario/Elliott - sources

MILAN (Reuters) - Banco BPM (MI:BAMI) is close to selling up to 7.8 billion euros (6.9 billion pounds) in bad loans along with a stake in the Italian bank's debt recovery business to Credito Fondiario and U.S fund Elliott, three sources familiar with the matter said.

The sale would allow Banco BPM to reduce its problem loan ratio to as low as 10.6 percent of total lending from 16 percent at the end of September, putting to rest concerns the bank may need to raise capital to clean up its balance sheet.

The board of Italy's third-largest bank will meet later on Monday to pick the winner of the race in which Credito Fondiario and Elliott were up against Italy's top bad loan specialist doBank (MI:DOB), backed by U.S. private equity firm Fortress, and a third group comprising U.S. funds TPG, Christofferson, Robb & Company and Davidson Kempner.

All the parties involved declined to comment.

Banco BPM earlier this month struck a consumer credit agreement with Credit Agricole (PA:CAGR) which helped to boost the Italian bank's capital, paving the way for this latest bad loan deal.

Problem loans are normally sold at a loss, which depletes a bank's capital reserves. A source involved the bidding process told Reuters last month Banco BPM's bad loans were being valued at a fifth of their gross book value.

Banco BPM's latest efforts to clean up its balance sheet had run into difficulties due to a sharp rise in state borrowing costs under the country's eurosceptic government, which has made foreign investors nervous and hit the value of banks' sovereign bond holdings.

Like other Italian banks, Banco BPM had seen its core capital eroded by the falling value of its domestic government bond holdings in the three months through June.

This has added to pressure on Banco BPM's shares, which trade at an almost 70 percent discount to its assets.

However, the bank managed to bolster its capital levels in the third quarter with an asset sale and accounting changes.

It gained a further capital benefit by selling part of its ProFamily consumer financing business to the Agos consumer credit joint-venture it has in place with Credit Agricole for 310 million euros.

Created last year from the merger of Banca Popolare di Milano and Banco Popolare , Banco BPM has already offloaded 11.5 billion euros in bad loans since the end of 2016.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.