September 28, 2016
A big piece of news in European banking that got eclipsed by the Deutsche Bank scare is Unicredit's plan to raise as much as €16bn with a combination of asset sales and a rights issue. Unicredit has an analyst-estimated capital shortfall of €7bn to €8bn, but intends to cap the size of its rights issue at €5bn-€6bn, for which it is said to consider selling the online broker FinecoBank, and a 40% stake in its Polish subsidiary Bank Pekao. The bank had already sold bits of both shortly after replacing its CEO in July. This is in addition to disposing of €20bn in gross NPL, as well as the already announced sale of asset manager Pioneer. A source for Reuters indicated that Unicredit may be trying to front-run Monte dei Paschi di Siena by executing its capital increase in November.
Another €5bn rights issue and €20bn gross NPL sale will make it all the more difficult for MPS to raise its own €5bn and sell €27bn gross NPL by year-end as planned. Corriere della Sera writes that MPS is preparing to approve its industrial plan next month and then to pass its capital increase through a general meeting in mid November. Then there will be an offer for the voluntary equity conversion of €4.5bn in subordinated bonds, of which €2.2bn are in the hands of 40,000 retail customers. The goal is to bring the size of the necessary right issue down from €5bn, for which there is little appetite in the markets. To bolster the success of the rights issue, MPS is said to be looking for an Asian or Middle-Eastern "anchor investor" that would take a stake in the bank.
In Germany, Spiegel writes that Commerzbank will this week launch a drastic restructuring plan involving cutting 9,000 jobs - nearly one in five - and withholding dividends, which have averaged €250m per year. The bank intends to improving its IT, which would make part of its back-office staff redundant, and to outsource some functions to external firms. According to Spiegel there will also be a restructuring of business lines, with its small firm customers being directed to the private banking arm, and large firms to the investment banking arm. The magazine writes Commerzbank is settling for the role of a large savings bank. Despite the restructuring plan, Handelsblatt writes Commerzbank is bidding to acquire Oldenburgische Landesbank (OLB) from Allianz. Apollo, a US private equity firm, is also said to be after OLB, a regional bank in northwest Germany capitalising about €300m. There have been rumours that Allianz wanted to get out of the banking business for years, having sold Dresdner bank in 2009.
As speculation over the future of Deutsche Bank rages, Andreas Dombret, Bundesbank head of supervision, butted in comparing Europe's large banks to dinosaurs facing extinction from a changed environment including reduced debt levels, fintech competition, demographic pressures and low interest rates, reports Reuters. He also suggested the focus on business models may be misplaced and the banking sector as a whole needs to shrink. For this, political support for banks should end. For what it's worth, DB CEO John Cryan told Handelsblatt that the bank does not need to raise capital.
We also have stories on the stagnation of world trade; on Spain's dismal budget execution; on how to screw VW without bankrupting it; on the Greek multi-bill; on a Greek pension fund in trouble; on Irish water charges; on Ireland's budget; on Sarkozy's outlandish plan to reverse Brexit; on Sarkozy's friend-turned-enemy; and on slowly dawning Brexit realism.