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UPDATE 2-Timing of Banca Carige cash call in spotlight at central bank talks
February 25, 2014 / 1:00 PM / 4 years ago

UPDATE 2-Timing of Banca Carige cash call in spotlight at central bank talks

(Adds sources saying Carige board to meet on Wed, two foundation board members quit)

By Andrea Mandala

MILAN, Feb 25 (Reuters) - Italian mid-sized bank Banca Carige risks a delay to a vital 800 million euro ($1.1 billion) cash call to strengthen its balance sheet after its largest shareholder sought to put off the bank’s fundraising plans.

Carige’s chairman and chief executive met Bank of Italy officials on Tuesday, a day after the charitable banking foundation that has a 46 percent in the Genoa-based lender asked to delay the cash call to mid-2014.

The bank’s board will meet on Wednesday to discuss the request from the Carige foundation, a source close to the matter said.

“The aim is to find a compromise,” said the source.

Separately, two members of the foundation board strongly opposed to a swift capital increase quit on Tuesday, another source close to the situation said.

Banca Carige, the foundation and the Bank of Italy declined to comment.

Carige is one of five Italian banks set to raise a total of 7 billion euros in fresh capital this year to absorb rising bad debts from the country’s weak economy.

The dispute over the timing of cash call mirrors wrangling that took place between management and the biggest shareholder at Banca Monte dei Paschi di Siena, Italy’s No. 3 bank.

Its main investor, also a charitable banking foundation like Carige‘s, successfully pushed back to at least mid-May a 3-billion-euro capital hike the management had wanted to carry out in January to get an early claim on investors’ cash.

Carige’s management want approval for its capital hike by the end of March, a timetable that the Bank of Italy also favours.

But the Carige foundation has no money to invest in it and would face a major dilution of its holding.

The foundation said late on Monday it would either call an extraordinary shareholder meeting to extend the March deadline or let the rights issue be approved by then but carried out in June.

INFLUENCE

Charitable foundations became key shareholders in leading Italian banks following the privatisation of publicly-owned banks in the early 1990s.

After supporting banks’ recapitalisation efforts in the past, some foundation shareholders have become an obstacle to fundraising plans as these would greatly diminish their influence over lenders.

“There are no examples outside of Italy of charitable institutions whose wealth is invested in just one class of assets,” said Stefano Gatti, finance professor at Milan’s Bocconi University.

“(This) has made the foundations’ fortune during good times but risks ruining them now that things have changed.”

Failure to boost Carige’s capital base by mid-year would likely result in Carige failing to meet minimum standards set by the European Central Bank (ECB) as part of its Europe-wide health check of banks.

Carige, one of 15 Italian banks currently under ECB scrutiny, had a Core Tier 1 ratio of 5.8 percent at the end of September. The ECB wants banks to have a Common Equity Tier 1 ratio, a more stringent measure of financial health than the Core Tier 1, of at least 8 percent.

“The foundation would like to gain more time, in the hope it can sell a portion of its stake to some strategic partners and hoping that a sale of insurer Carige Assicurazioni might reduce the size of the cash call,” said Luca Comi, an analyst at ICBPI, referring to an insurance subsidiary of the bank.

“Time is running out. The meeting at the Bank of Italy today may help clarify the central bank’s stance.” (Additional reporting by Lisa Jucca and Valentina Za; Editing by Jane Merriman and Pravin Char)

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