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Fears rise over Commerzbank and MPS
By Patrick Jenkins in London, Rachel Sanderson in Milan and James Wilson in Frankfurt
European regulators are convinced that two of the continent’s banks will fail to produce credible plans to plug capital deficits by Friday’s deadline, exposing both to the risk of full or partial nationalisation.
Officials said that it looked “almost inevitable” that a fresh injection of state funds would be needed at Italy’s Monte dei Paschi di Siena and Germany’s Commerzbank. “These are the big cases,” said one.
MPS was shown to have a €3.3bn capital shortfall in December stress tests conducted by the European Banking Authority. Commerzbank had a €5.3bn shortfall. Both banks declined to comment on the prospect they might have to take state funding, though they insisted in private that they could make up the gap through commercial means.
Insiders at Commerzbank believe that its plan to raise the funds without state help is credible. Last month Eric Strutz, finance director, said: “We stand by our intention not to make use of additional public funds.” Commerzbank is expected to announce as soon as Thursday that it has already narrowed the capital gap by about €3bn, more than analysts expect.
The EBA tests, which modelled for market-based “haircuts” on the value of banks’ European sovereign bond holdings, found that 31 banks out of 70 tested needed to raise an aggregate €115bn of additional capital. The regulator gave banks until June to do so, with a deadline of Friday to submit a clear plan.
Only UniCredit, Italy’s biggest bank by assets, has launched a cash call, aiming to raise €7.5bn. But analysts say that the hammering its shares have taken – down more than a quarter since it priced the rights issue a fortnight ago – has killed prospects of other banks trying a rights issue. Instead, the plans that must be submitted by Friday are expected to consist almost entirely of measures to shrink their way into compliance.
In the December test, Spain’s Santander had the biggest capital shortfall, of €15.3bn, but said recently that it had bridged the gap.
MPS is seen to be at the greatest risk of at least partial nationalisation. Three people familiar with the matter said Cassa Depositi e Prestiti, the state financing agency, could provide funds either directly to the bank or indirectly through its main shareholder, the Monte dei Paschi foundation.
It hopes to raise the funds demanded by the EBA through joint venture deals, the sale of real estate, deleveraging of risk-weighted assets and the conversion of €1.1bn of structured equity products into capital, said one person familiar with the matter.
Commerzbank, in which the German government has a 25 per cent shareholding, plans a mix of retained earnings, limited lending, asset sales and capital management.
The EBA’s stance, insisting on additional capital over a short time frame, has run up against stiff resistance in Germany and Italy, with the banking associations of both countries fiercely criticising the regulator’s approach.
Fears rise over Commerzbank and MPS
By Patrick Jenkins in London, Rachel Sanderson in Milan and James Wilson in Frankfurt
European regulators are convinced that two of the continent’s banks will fail to produce credible plans to plug capital deficits by Friday’s deadline, exposing both to the risk of full or partial nationalisation.
Officials said that it looked “almost inevitable” that a fresh injection of state funds would be needed at Italy’s Monte dei Paschi di Siena and Germany’s Commerzbank. “These are the big cases,” said one.
MPS was shown to have a €3.3bn capital shortfall in December stress tests conducted by the European Banking Authority. Commerzbank had a €5.3bn shortfall. Both banks declined to comment on the prospect they might have to take state funding, though they insisted in private that they could make up the gap through commercial means.
Insiders at Commerzbank believe that its plan to raise the funds without state help is credible. Last month Eric Strutz, finance director, said: “We stand by our intention not to make use of additional public funds.” Commerzbank is expected to announce as soon as Thursday that it has already narrowed the capital gap by about €3bn, more than analysts expect.
The EBA tests, which modelled for market-based “haircuts” on the value of banks’ European sovereign bond holdings, found that 31 banks out of 70 tested needed to raise an aggregate €115bn of additional capital. The regulator gave banks until June to do so, with a deadline of Friday to submit a clear plan.
Only UniCredit, Italy’s biggest bank by assets, has launched a cash call, aiming to raise €7.5bn. But analysts say that the hammering its shares have taken – down more than a quarter since it priced the rights issue a fortnight ago – has killed prospects of other banks trying a rights issue. Instead, the plans that must be submitted by Friday are expected to consist almost entirely of measures to shrink their way into compliance.
In the December test, Spain’s Santander had the biggest capital shortfall, of €15.3bn, but said recently that it had bridged the gap.
MPS is seen to be at the greatest risk of at least partial nationalisation. Three people familiar with the matter said Cassa Depositi e Prestiti, the state financing agency, could provide funds either directly to the bank or indirectly through its main shareholder, the Monte dei Paschi foundation.
It hopes to raise the funds demanded by the EBA through joint venture deals, the sale of real estate, deleveraging of risk-weighted assets and the conversion of €1.1bn of structured equity products into capital, said one person familiar with the matter.
Commerzbank, in which the German government has a 25 per cent shareholding, plans a mix of retained earnings, limited lending, asset sales and capital management.
The EBA’s stance, insisting on additional capital over a short time frame, has run up against stiff resistance in Germany and Italy, with the banking associations of both countries fiercely criticising the regulator’s approach.
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