Banca Monte dei Paschi di Siena SpA has trimmed its nonperforming loan burden to €4 billion after completing a deal dubbed Project Hydra, which saw the bank offload a significant proportion of its bad loans to state debt manager AMCO - Asset Management Co. SpA
"The recent Hydra transaction was the final test of a long de-risking process," CEO Guido Bastianini told analysts during the Italian lender's fourth-quarter earnings call.
The bank's NPL pile totaled €11.4 billion at the end of the third quarter of 2020, before the completion of the deal. Its transitional common equity Tier 1 ratio stood at 12.1% following the close of Hydra.
Monte dei Paschi, which was rescued from the brink of collapse in a state bailout in 2017, is still roughly 64% owned by the Italian state. But it is under pressure to re-privatize as part of the conditions of its bailout. The bank has so far struggled to find a buyer, partly due to its high level of NPLs, but also because of its €2 billion capital hole and up to €10 billion in legal claims. UniCredit SpA has been in the picture as a potential buyer, but analysts say that much will hinge on the attitude of newly appointed CEO Andrea Orcel toward the deal.
However, Apollo Global Management Inc. has emerged as a potential suitor, and Monte dei Paschi confirmed earlier in February that the American private equity fund has sought access to its data room, which it recently opened up to interested buyers.
Monte dei Paschi intends to raise capital to plug its current shortfall, and plans to do so are under review by the European Central Bank, CFO Giuseppe Sica said during the call.
The bank reported a net loss of €1.69 billion for the 2020 full year compared with €1.03 billion a year previously. The loss was largely due to increased provisions, which rose to €984.0 million compared with €155.9 million in 2019.
Monte dei Paschi's online banking division, Banca Widiba, saw an uptick in traffic and account sign-ups during 2020. Total net flows on the platform reached €792 million in 2020, a sevenfold increase on 2019's €118 million. New accounts increased to 27,200 during 2020, a 19% increase over the course of the year.
"[The] business model was particularly effective this year with more and more people seeking online services," Bastianini said.
Near the beginning of the coronavirus pandemic, Monte dei Paschi offered a grace period to borrowers who were struggling with loan repayments as the result of the crisis. As of the end of December, the bank had €11.8 billion of loans under moratoriums, down from €15.5 billion in June 2020. In the fourth quarter, roughly 23% of moratoriums on loans expired and were not renewed, according to a company presentation.
