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UniCredit's €13B rights issue; Monte dei Paschi's 11th hour plan to raise €5B


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UniCredit's €13B rights issue; Monte dei Paschi's 11th hour plan to raise €5B

S&P Global Market Intelligence offers our top picks of banking news stories and more published throughout the week.

Crunch time for Monte dei Paschi

* Banca Monte dei Paschi di Siena SpA decided to forge ahead with a last-ditch plan to raise €5 billion by the end of 2016 after the ECB rejected its request to extend the deadline of its recapitalization plan until Jan. 20, 2017. The bank said its planned share sale will be priced at a maximum of €24.90 apiece and a minimum of €1, with 65% of the offering set to be allocated to institutional investors and the remaining 35% aimed at the wider public.

* The embattled bank also reopened its offer to convert certain subordinated bonds into equity, extending the swap offer to retail investors. The offer period will run from Dec. 16 to Dec. 21.

* DBRS this week downgraded Monte dei Paschi's ratings and changed its review of the ratings to developing from negative implications, reflecting the agency's view that the ratings may be downgraded, confirmed or upgraded depending on the progress of Monte dei Paschi's planned recapitalization.

UniCredit's Pioneer sale and €13 billion rights issue

* UniCredit SpA will sell Pioneer Global Asset Management SpA to Amundi SA for an all-cash consideration of €3.55 billion, less than a week after agreeing to sell most of its stake in Bank Pekao SA to PZU SA and the Polish Development Fund. Amundi will finance the transaction with €1.5 billion of excess capital and €600 million of senior and subordinated debt, as well as a €1.4 billion rights issue to be launched in the first half of 2017.

Amundi CEO Yves Perrier said the French company will lay off about 450 workers out of 5,000 employees globally in the wake of the Pioneer deal, Reuters said.

* The Italian bank said it intends to launch a €13 billion rights issue, pay no dividend in 2016 and cut some 14,000 jobs as part of a group-wide restructuring. It also expects to book fourth-quarter 2016 one-off charges of €12.2 billion, including loan loss provisions of €8.1 billion and net restructuring charges of €1.7 billion.

* UniCredit CEO Jean-Pierre Mustier voiced confidence in the success of the €13 billion rights issue, saying the bank's plan "does not depend on the political evolution in Italy, it does not depend on Monte dei Paschi and does not depend on Basel IV."

More news from Italy

* Italian President Sergio Mattarella asked Foreign Minister Paolo Gentiloni to replace Matteo Renzi as the country's prime minister and form a new government in the wake of Renzi's resignation. Gentiloni said his government will look to aid Italy's beleaguered banks and is prepared to "intervene in order to guarantee the stability of banks and the savings of our citizens." Pier Carlo Padoan retained his post as Italy's economy minister.

* Moody's revised its outlook on the Italian banking system to negative from stable, citing concerns about profitability and capital of the country's banks and weakening confidence in the sector following the result of the Dec. 4 constitutional reform referendum.

* Also, La Repubblica reported that the Italian Treasury wants to make €15 billion available to support the capital increases of Italy's most fragile lenders and another €80 billion in guarantees for future liquidity crises. The Treasury intends to launch the €95 billion package next Thursday if attempts to find a market solution for Monte dei Paschi's capital problems fail.

Moving over to Britain

* Barclays Plc agreed to sell its French retail business to AnaCap Financial Partners LLP, a deal whose completion will mark Barclays' exit from retail banking in continental Europe. The transaction covers 74 retail branches, a life insurance business, wealth and investment management and brokerage operations.

* Royal Bank of Scotland Group Plc is looking to sell a small portion of its Williams & Glyn operations after receiving no interest for the entire business, a source told Bloomberg News. RBS needs to sell the business by the end of 2017 to comply with a European Commission directive.

* The British government further cut its stake in Lloyds Banking Group Plc to below 7% after the latest round of share sales. The Treasury now holds 4,943,698,490 shares and an equivalent number of voting rights in Lloyds, representing 6.93% of the lender's voting rights, down from the previous 5,702,084,663 shares.

Basel IV and MREL

* Banks using their own internal models to calculate risk will have to post at least 75% of the capital against assets called for by standard models provided by the Basel Committee on Banking Supervision. The capital floor requirement is included in a package of reforms to risk-weighting rules that will be sent to the Basel Committee's governing body, the Group of Governors and Heads of Supervision, in 2017. The changes to risk-weighting rules are meant to finalize the Basel III post-crisis regulatory reforms but are widely dubbed Basel IV.

* The European Banking Authority estimated that possible funding needs for the minimum requirement for own funds and eligible liabilities, or MREL, would range between €186.10 billion and €276.20 billion, for a sample comprising 133 banks from 18 EU member states. The EBA previously estimated that European banks might need to sell as much as €790 billion in loss-absorbing liabilities to meet new regulations.

In other news

* In a widely expected move, the U.S. Federal Reserve raised its key interest rate by 25 basis points, lifting the target range for the federal funds rate to between 50 basis points and 75 basis points.

* The Bank of England kept the bank rate unchanged at 0.25% and decided to continue with a £60 billion program of government bond purchases slated to take its overall quantitative easing package to £435 billion.

* The European Stability Mechanism moved to suspend short-term aid for Greece after the country's prime minister, Alexis Tsipras, announced a €617 million Christmas payout to low-income pensioners from the 2016 primary budget surplus. A spokesman for the ESM said the institution was "currently assessing the impact of Greek government decisions vis-a-vis the ESM program commitments and targets."

* London Stock Exchange Group Plc and Deutsche Börse AG received a statement of objections from the European Commission relating to their proposed all-share merger, saying the statement contained "a narrower scope of issues" compared with when the EC opened an in-depth investigation into the merger at September-end. The EC is due to take a final decision by March 6, 2017.

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