The shareholders of the Italian government-owned lender Monte dei Paschi di Siena (BMPS) have approved a bad-loan clean-up plan to accelerate the bank’s sale.
The plan, dubbed as the ‘Hydra’ scheme, comprises the sale of bad debts worth €8.1bn ($9.37bn) to state-owned asset manager AMCO.
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The plan was approved at an extraordinary shareholders’ meeting, and is expected to reduce BMPS’ impaired loans to 4.3% of its total lending, from 40%.
Under the ‘Hydra’ scheme, BMPS will also transfer other assets and liabilities including €1.1bn in capital.
The plan had secured the final approval from the European Central Bank (ECB) last month; however, the regulator has demanded the bank to shore up its capital.
Therefore, the Italy treasury, which has worked on the plan for two years, is hoping to find a buyer by the year-end to acquire the government stake in BMPS.
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By GlobalDataItaly was initially looking at Banco BPM as the right fit for acquiring BMPS.
Italy also approached UniCredit’s executives to find out if they are interested in acquiring the government’s majority stake in BMPS.
Banco BPM said that it remains ready for further industry consolidation following UBI Banca’s hostile takeover by Intesa Sanpaolo.
The Italian government first bailed out BMPS by acquiring a 68% stake for €5.4bn ($6.34bn) back in 2017 when the bank was moving into bad debts following years of mismanagement.
According to the bailout terms agreed with the European Union competition authorities; this stake must be sold by the end of 2021.
At current market prices, the stake is worth only €1.1bn.
Banks in Europe have been preparing for cross-border mergers and deals as they try to recover their profitability.
Recently, Spain’s Unicaja Banco resumed negotiations on merger with rival Liberbank, while CaixaBank agreed to buy rival Bankia, valuing the business at €3.8bn ($4.5bn).
Last month, Banco Sabadell was also eyeing strategic options in the European banking sector as the merger talks began taking place.
In May, HSBC signed a deal with Landesbank Baden-Wuerttemberg (LBBW) to take full control of its German unit.
