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Bailout Of World's Oldest Bank In Jeopardy, Rests On Hope That "Ship Does Not Sink"

Tyler Durden's picture





 

The ongoing debacle of Italy's Banca Monte dei Paschi (BMPS) took a turn for the worst today. The bank's largest shareholders (MPS Foundation) approved (read - forced through) a delay in a EUR 3 billion capital raise, which the bank needs to avoid nationalization, until May. The delay (which will cost the bank EUR 120 million in interest) allows MPS more time to liquidate their 33.5% holding before their stake is massively diluted. Management is 'considering' resignation and is "very annoyed," but the city Mayor is going Nationalist with his delay-supporting comments that "we cannot let the third biggest bank in this country fall prey to foreign interests." So Europe is recovering but they can't even raise a day's worth of POMO to save the oldest bank in the world?

 

Via Reuters,

Italy's third-biggest bank Monte dei Paschi di Siena was forced to delay a vital 3 billion euro ($4.1 billion) share sale to raise capital until mid-2014 because of shareholder opposition, plunging its turnaround plan into uncertainty.

 

The bank's chairman and its chief executive may now resign after their plan to launch the cash call in January was defeated at an extraordinary shareholder meeting on Saturday due to the vote of Monte Paschi's top shareholder.

 

The world's oldest bank needs to tap investors for cash to pay back 4.1 billion euros in state aid it received earlier this year and avert nationalization

Simple game theory really - why would the largest shareholder "guarantee" losses now when it can try and liquidate more of its exposure over time?

But the cash-strapped Monte dei Paschi foundation - whose stake in the bank is big enough to veto any unwanted decision - forced a postponement until at least mid-May to win more time to sell down its 33.5 percent holding and repay its own debts.

 

...

 

Antonella Mansi, a feisty 39-year-old businesswoman recently appointed head of the Monte dei Paschi foundation, said her insistence on a cash call delay did not amount to a no-confidence vote in the bank's management.

 

But she said that carrying out the capital increase in January would massively dilute the foundation's holding, leaving it with virtually nothing to sell to reimburse debts of 340 million euros.

 

"We have a precise duty to ensure (the foundation's) survival. You can't ask us to let it collapse," she said.

Management is "very annoyed"...

Chairman Alessandro Profumo, a strong-willed and internationally respected banker who was formerly the chief of UniCredit, said he and CEO Fabrizio Viola would decide in January whether to step down.

 

"These are decisions one takes in cold blood and in the right place," Profumo said at the meeting.

 

"What I have on my mind is a 3 billion euro cash call because we need to pay back 4 billion euros to taxpayers. Today this is uncertain and at risk," he told a press conference.

 

Viola, sitting at his side, told reporters he would do everything "so that the ship does not sink", but that he could not take responsibility for mistakes made by others.

Of course, there is risk either way...

"It's important to carry out the capital increase as early as possible," said Roberto Lottici, fund manager at Ifigest. "The risk is that the bank finds itself rushing into a cash call later at a lower price than what it could achieve now."

 

...

 

"It's hard to think that the third largest Italian bank can't find a pool of banks able to support the cash call after May 2014," said Antonella Mansi, the president of the MPS foundation, at the shareholders' meeting.

and given the number of jobs involved... local officials are now reacting in favor of the delay (hoping for domestic savior)...

But in Siena, where the bank is known as "Daddy Monte" and is the biggest employer, fears that the cash call might sever the umbilical cord between the lender and the city run high.

 

Siena mayor Bruno Valentini, whose city council is the top stakeholder in the Monte dei Paschi foundation, said on Friday a postponement might help keep the bank in Italian hands.

 

"We cannot let the third biggest bank in this country fall prey to foreign interests," he said. "Monte dei Paschi is not just an issue in Siena, it is a big national issue."

So, even after all the lqiuidty provision; yields and spreads on European debt back near record lows; calls from US asset managers that Europe is recovering and will be the growth engine; and hopes that Europe's AQR stress test (and resolution mechanism) will be the gold standard for confidence in their banking system... they still can't find a group of greater fools to pony up EUR3 billion in real (not rehypothecated) money to save the world's oldest bank - that's a day's worth of Fed POMO!!!!

 

On an odd side note, we did note a major surge in ECB margin calls this week...


 


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Sat, 12/28/2013 - 15:35 | Link to Comment johngaltfla
johngaltfla's picture

Perhaps they can get a Yellen handout.

Sat, 12/28/2013 - 15:58 | Link to Comment Xibalba
Xibalba's picture

AHhh...Yellen.  The Blood Moon is coming.

Sat, 12/28/2013 - 19:20 | Link to Comment max2205
max2205's picture

And....bank run in 3. 2. 1.....

Sun, 12/29/2013 - 10:29 | Link to Comment andrewp111
andrewp111's picture

The Europeans are too beaten down and complacent to have any kind of bank run. Not until the full Cyprus is upon them, that is.

Sun, 12/29/2013 - 20:24 | Link to Comment Rafferty
Rafferty's picture

More likely that something will be contrived whereby the depositors are bailed-in and/or the taxpayer will be landed with the tab.  IOW the people who should suffer will not and vice versa.

Sat, 12/28/2013 - 16:39 | Link to Comment aVileRat
aVileRat's picture

Nah, here comes the Italian Bail-in that Legarde warned them not to toy with.

This will go one of two ways, one is the ECB fronts cash to a bunch of anchor investos who become bagholders on the shares and make money back on vol. hedges or two, buyers strike and ECB needs to directly bail out 3-card Monte.

If Monte does go under, then yes, this will be a resonance cascade on par with LEH. Nobody wants Monte to go full retard.

Yes I am dropping a Leo reference into an Italian bent bank article. Because its meta-funny.

 

Sat, 12/28/2013 - 19:27 | Link to Comment max2205
max2205's picture

Full Monte = full retard

Sat, 12/28/2013 - 20:39 | Link to Comment USA USA
USA USA's picture

I would wager, Dollars to Donuts, that Buttnanke has already given that bank billions of my childrens dollars!

Sat, 12/28/2013 - 15:40 | Link to Comment JLee2027
JLee2027's picture

Chain reaction anyone?

 

But the cash-strapped Monte dei Paschi foundation - whose stake in the bank is big enough to veto any unwanted decision - forced a postponement until at least mid-May to win more time to sell down its 33.5 percent holding and repay its own debts.

 

Sat, 12/28/2013 - 15:48 | Link to Comment Colonel Klink
Colonel Klink's picture

Letting the rich bail before the peon suckers get stuck with the bill/bail in.

Sat, 12/28/2013 - 16:27 | Link to Comment mjcOH1
mjcOH1's picture

"forced a postponement until at least mid-May to win more time to sell down its 33.5 percent holding and repay its own debts."

That is Italian for 'forced a postponement until it has sold enough of its rapidly depreciating stake, where it can no longer force further postponement'.

Sat, 12/28/2013 - 16:39 | Link to Comment Colonel Klink
Colonel Klink's picture

Same thing basicially.  The little guy will be the sucker.  Even those who sell enough to eventually be the "little guy", but those have already fled with their gains so what's left to be looted doesn't compare to what they've already looted.

Sat, 12/28/2013 - 15:37 | Link to Comment foxenburg
foxenburg's picture

they do a good horse race in siena town square a couple of times a year; i recommend a stay. 

Sat, 12/28/2013 - 18:11 | Link to Comment Its_the_economy...
Its_the_economy_stupid's picture

was this race a scene in the James Bond flic w Daniel craig?

Sat, 12/28/2013 - 15:42 | Link to Comment Seize Mars
Seize Mars's picture

That Antonella Mansi is hot, hot, hot!!!

http://www.sienanews.it/wp-content/uploads/2013/08/mansi-antonella-IMAGO...

Anyways, one of the many things I learned from the eggheads at vonMises.org is that fractional reserve banking is always teetering on the edge of insolvency, which is why they are really bailout machines. So statism and banking goes hand in hand. You can "solve" this bank's balance sheet problem but it will happen again.

So when are you ready, friends, to just pull the plug on this bullshit?

Sun, 12/29/2013 - 10:10 | Link to Comment Spumoni
Spumoni's picture

You sure that ain't an adam's apple under her chin...looks a little tranny to me...

Sun, 12/29/2013 - 16:27 | Link to Comment Seize Mars
Seize Mars's picture

Ok, we'll let Antonella do me while you do you.

Sat, 12/28/2013 - 15:44 | Link to Comment PontifexMaximus
PontifexMaximus's picture

A little maths: 3ok on the payroll, which is/are at least 60k votes. The foundation is controlled by the PD, the left(ish) party. Questions?

Sat, 12/28/2013 - 15:54 | Link to Comment Colonel Klink
Colonel Klink's picture

Hahahahahahahahah.......Bwahahahahahahahaha.............(deep breath).........Hahahahahahahaha

Couldn't happen to a nicer bunch of crooks.  Mario Draghi call your office.

Hahahahahahaha

If I were a depositor I'd be withdrawing every penny of my money.

Hahahahahaha...........but it's all fixed............Hahahahaha

Sorry trying to catch my breath.

EDIT:  Wished I actually had something cerebral to add but if you're still banking with any of the majors, you're the one who needs your head examined.  That goes for US or European major banks!

Sat, 12/28/2013 - 15:54 | Link to Comment PontifexMaximus
PontifexMaximus's picture

Have u been in Italy lately? Will never happen, they can only move EUR 999 in cash, just FYI and: it never will happen in Italy!

Sat, 12/28/2013 - 15:56 | Link to Comment Colonel Klink
Colonel Klink's picture

I have not.  I was in Germany 5 years ago for a funeral.  Things seemed good there but I know it's deteriorated further in the EU.  My German relatives are/were NOT happy about the whole Euro thing.  They want their DM back!!!

And were I limited by withdrawl amount, you'd bet your ass I'd be there daily for the limit and buying PM's hand over fist via wire/transfer if I had a sizeable amount in the bank(s).

Sat, 12/28/2013 - 16:04 | Link to Comment PontifexMaximus
PontifexMaximus's picture

I can assure , that the MPS story is already fixed, that it is a big yawn and that the Krauts need the EUR, esp. now after the elections. EURUSD for 1.50 in 2014, I come up for the check in a famous italian restaurant wherever you like in Italy.

Sat, 12/28/2013 - 16:14 | Link to Comment Colonel Klink
Colonel Klink's picture

Well thank you!  I may be back this summer for a visit with relatives.  Never know, I may take you up on your offer.  If I do, can I say I'm from Canada so everyone doesn't hate me? ;)

BTW:  I've never been to Italy.  I'd love to visit one day.  Need to get a Eurail pass.

Sat, 12/28/2013 - 16:40 | Link to Comment PontifexMaximus
PontifexMaximus's picture

My word is my bond!

Sat, 12/28/2013 - 16:54 | Link to Comment Colonel Klink
Colonel Klink's picture

Such a rarity these days! +1

Sat, 12/28/2013 - 16:04 | Link to Comment Skateboarder
Skateboarder's picture

I predict cash withdrawal limits of $100 and no more cashing checks over $1000 by the end of '15 in the US (well, you can, but you'll get a maximum of $1000 in cash when you do, rest going to some account which can be redeemed later, even if you don't have an account with a bank or cashing service).

Sat, 12/28/2013 - 16:10 | Link to Comment Colonel Klink
Colonel Klink's picture

I honestly don't think the limit would be that low.  Time will tell if you're correct.

Sat, 12/28/2013 - 16:22 | Link to Comment Skateboarder
Skateboarder's picture

Basing this off my recent experience of having $300 in a checking account and not being able to get more than $1000 in cash from cashing an EMPLOYER paycheck this year (the remianing thousand went into the account)

Sat, 12/28/2013 - 16:29 | Link to Comment Colonel Klink
Colonel Klink's picture

Fair enough assessment.  Can you take the check to the issuing bank to cash the whole thing?  Sorry my old banker experience coming back to haunt me.

If they won't, raise a stink.  It usually works.

Sat, 12/28/2013 - 18:42 | Link to Comment snblitz
snblitz's picture

Bank of America is perfectly happy to fail to make good on checks drawn against them.  I took an employer check to the branch of BofA it was drawn against and they refused to hand me cash in exchange for it.  Got to talk to the manager and she said no.  I complained to every regulatory agency in existence and they said they did not care.  Of course, I no longer have any money in any bank.

Sat, 12/28/2013 - 19:36 | Link to Comment Colonel Klink
Colonel Klink's picture

Interesting why they still call it a "DEMAND deposit account".

Sat, 12/28/2013 - 22:12 | Link to Comment Skateboarder
Skateboarder's picture

That's exactly what Smells Lardo told me to do. Fucking bastards.

Me thinks liquid is is in the low. Everywhere.

Sat, 12/28/2013 - 16:50 | Link to Comment FredFlintstone
FredFlintstone's picture

I do some moonlighting and have regularly been cashing those checks at my bank (top 5 in size) here in the Midwest. These checks are usually in excess of $2k each. Walked out yesterday with a thick stack of $20s and an old geezer was glaring at me from his minivan. Should have put it in an envelope.

Sat, 12/28/2013 - 16:53 | Link to Comment Colonel Klink
Colonel Klink's picture

Yeah I wouldn't be out flashing cash or anything else of much value (gold jewelery, phones, etc.) for fear of other's more envious on the wrong side of a gun.

Sat, 12/28/2013 - 18:31 | Link to Comment STG5IVE
STG5IVE's picture

I wouldn't even be talking about it online

Sun, 12/29/2013 - 00:05 | Link to Comment FredFlintstone
FredFlintstone's picture

I pay taxes on it and don't keep it around the house for long. Oh, and have been itching to fire my hollow points at a moving target.

Sat, 12/28/2013 - 16:41 | Link to Comment PontifexMaximus
PontifexMaximus's picture

Hope ur wrong on it!

Sat, 12/28/2013 - 18:44 | Link to Comment Uber Vandal
Uber Vandal's picture

@ Colonel Klink:

The Netherlands is not too thrilled with all of this either, and miss the Guilder.

I still remember my friends telling me how they went to bed one day having 1000 guilders, then waking up to 500 Euros the next day (for example), but everything cost twice as much.

 

Sat, 12/28/2013 - 19:40 | Link to Comment Colonel Klink
Colonel Klink's picture

Yep, bankster THEFT at it's finest!  Trust them at your peril.

Sat, 12/28/2013 - 15:52 | Link to Comment Joebloinvestor
Joebloinvestor's picture

BUNGA BUNGA!

Italian LIARS.

Sat, 12/28/2013 - 15:58 | Link to Comment 10044
10044's picture

Bail-ins bitchez...coming to a country near you

Sat, 12/28/2013 - 16:49 | Link to Comment GumbyMe
GumbyMe's picture

Don't worry, somehow the US taxpayers (yeah, I know it's an Italian bank) will be on hook to pay for what's about to happen.

Sat, 12/28/2013 - 16:57 | Link to Comment Colonel Klink
Colonel Klink's picture

Sure it's just history repeating itself, even though the bearded clam said he wasn't bailing out foreign banks.

Sat, 12/28/2013 - 16:59 | Link to Comment Michelle
Michelle's picture

Bailing out banks when nothing has changed is not a solution and is asking for more of the same. We all know many banks here should have failed but didn't and the new regulations are a joke. Yellen will be tested and I wouldn't be surprised to see the Fed unable to do anything to stop it this time. Let the games begin.

 

Sat, 12/28/2013 - 17:01 | Link to Comment Colonel Klink
Colonel Klink's picture

I know they say to be careful about what you ask for but, bring it!  I'm ready to get this shit show on the road so we can move forward.

Sat, 12/28/2013 - 17:28 | Link to Comment El Vaquero
El Vaquero's picture

Here here!

Sat, 12/28/2013 - 17:46 | Link to Comment Colonel Klink
Colonel Klink's picture

Good to see you stalking me EV.

Sat, 12/28/2013 - 17:55 | Link to Comment El Vaquero
El Vaquero's picture

As long as I'm not being creepy about the stalking.  Well, not too creepy anyway. 

Sat, 12/28/2013 - 21:09 | Link to Comment disabledvet
disabledvet's picture

how's "the world's first necropolis" for creepy: http://en.wikipedia.org/wiki/Varna_Necropolis "the first golden penis" was discovered here. hmmmm. interesting. Here was the German solution: http://en.wikipedia.org/wiki/Balkan_Campaign_(World_War_II) "it was over quick" unlike what Churchill had predicted. without a doubt this Campaign led directly to Operation Barbarossa. "all that gold sits in Portugal now." http://www.nytimes.com/1997/01/10/world/nazi-gold-and-portugal-s-murky-r...

Sun, 12/29/2013 - 20:29 | Link to Comment Rafferty
Rafferty's picture

Me too.  I'm prepped up as much as possible and have about a year's physical cash to hand.  Hopefully the peons will arise and we'll see peasants with blazing torches heading for the castle.

Sat, 12/28/2013 - 17:11 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Quick, Antonio - EXPORT moar pasta and olive oil!........

Sat, 12/28/2013 - 17:22 | Link to Comment jmcadg
jmcadg's picture

These crooks do not recognise country borders. This is family. One brother bails out another!

Bring the BS.

Sat, 12/28/2013 - 20:03 | Link to Comment Paracelsus
Paracelsus's picture

Agreed.I am so very sick of their lies.

Enron: "Everything is fine.  Ooops.Sorry about your thirty years worth of shares getting tanked!"

Bear Stearns/Lehman/AIG/Merrill Lynch/etc. etc.

"Everything is fine.Never better!"

I thought the way they shuttered the banks in Cyprus before the Bail-in was a bit low and dirty. Yep,looks like bank-run time for the Italians.A bit funny from the worlds greatest bureaucrats."Just hold the door open for a few months,mate.Your a sport....."

Sat, 12/28/2013 - 20:53 | Link to Comment disabledvet
disabledvet's picture

Wanna bankrupt Detroit? http://www.youtube.com/watch?v=Iwio208q3jY no problem.

Sat, 12/28/2013 - 23:43 | Link to Comment wisehiney
wisehiney's picture

JEOPARDY Bonus Round question......

What is the masculinity level of the bankers who imperil the world? 

"I'll take minus 1000 Alex...."

Sun, 12/29/2013 - 09:54 | Link to Comment falak pema
falak pema's picture

There is only ONE rule in Eurozone today : The Merkel Dictat.

It has conditioned the banking consolidation theory, still to be put into practice.

The Merkel rule has imposed that the local banks must first de defended by local governments. Here its a circular relation as these banks are endangered as a previous Sarko-Merkel dictat obliged banks to swap their holdings of soveregin debt by consolidating local banks' holding a max of their own sovereign debt; often by back room LTRO and "sterilised" bond dealings via ECB. (Remember how Berlu grimaced when the Sarko-Merkel dictat said to him : Italian banks your baby!)

Anyways, today these banks are shored up by their own government whose bonds they also hold! 

So the euro rule is :

1° Governments are first line of defense. Its hilarious to see the government now says "we run; these guys are totally phukked up !" Conversely, which foreign bank or equity fund would put money in this and under what conditions?

2° If the bank is not nationalised then the Euro bank mechanism steps in :

a) Massive Bail ins first to bleed depositors; whats left of them.

b) ESM mechanism to shore up the shell of a bank thats left by capital restructuring.

Thats my understanding. So right now we have to see if the Italian government pulls the plug and nationalises it after having sold its remaining shares to gullible buyers ! 

Sounds like a Bankia type deal as in Spain ! Government turned triple time predator! 

Sun, 12/29/2013 - 20:52 | Link to Comment jubber
jubber's picture

FTSEMIB only up 1200 points in 6 working days, nothing to see here

Do NOT follow this link or you will be banned from the site!