Italy offers state-backed options to shore up Carige

ROME/MILAN (Reuters) - The Italian government approved a decree aimed at shoring up troubled lender Banca Carige CRGI.MI, offering it access to a series of state-support options including recapitalisation.

FILE PHOTO: he logo of Carige bank is seen in Rome, Italy, April 9 2016. REUTERS/Alessandro Bianchi/File Photo

The decree, signed off on Monday after a surprise cabinet meeting, will allow the bank to benefit from state-backed guarantees for new bond issues and funding from the Bank of Italy.

The lender, which last year failed to secure shareholder backing for a capital increase, will also be able to request access to state-backed precautionary recapitalisation, if needed.

According to a financial source close to the matter, Carige would only consider a request for precautionary recapitalisation if new and unforeseen problems arose.

In 2017 European Union state aid regulators approved a precautionary recapitalisation at Banca Monte dei Paschi di Siena BMPS.MI after the lender agreed to a drastic overhaul. EU rules permit such a scheme only if the bank is solvent.

In a statement, the government said the aim of the decree was to preserve the stability of Carige and allow it to press ahead with plans to cut bad loans and bolster capital.

The European Central Bank (ECB) last week selected three commissioners to try to save the Genoa-based bank after the Malacalza family, Carige’s biggest stakeholder, blocked a share issue that was part of an industry-financed scheme to stave off a collapse.

Italy’s FITD depositors protection fund bought a 320 million euro (288 million pounds) hybrid bond late last year to help Carige to reach a required total capital threshold. Carige, however, failed to gain shareholder backing for an up to 400 million euro new share issue that would have been guaranteed by the bond’s conversion into equity.

Earlier on Monday the administrators met Treasury Minister Giovanni Tria before going on to meet top managers at FITD but no details of what was discussed were released.

A person familiar with the matter said the meeting with FITD would broach the possibility of lowering the bond’s interest payments.

Carige was not immediately available for a comment.


Carige’s failure to approve the capital increase triggered a stepping up of the coupon to 16 percent from 13 percent, which represents 51 million euros in annual interest, further stretching the loss-making bank’s finances.

The fund’s contributors are other Italian lenders that came to Carige’s rescue when the sector is under pressure from slowing economic growth and rising borrowing costs under the country’s Eurosceptic government.

Carige or supervisory authorities can decide to convert the bond into equity if the bank’s core capital falls below minimum requirements, according to a document on Carige’s website.

The bank’s capital ratio stood at 10.8 percent at the end of September - above an ECB minimum threshold of 9.63 percent, though the ECB will soon set a new threshold for Carige for 2019.

Raffaele Lener, one of the three commissioners running Carige, said in a newspaper interview published on Monday that the bank had to negotiate “a different solution” with the fund given the current situation with the bond.

Lener also told la Repubblica’s Affari&Finanza supplement that the bank would need to seek approval from market watchdog Consob for a resumption in trading of Carige shares and bonds, which are currently suspended.

He said the suspension was an issue for the bank’s image and liquidity but a capital increase may not be necessary if the bank can quickly find a merger partner or manage to overhaul its business.

The ECB has told Carige to consider a merger with a stronger peer.

However, bankers say that Carige, which has sold off its best assets in recent years, is overly exposed to the depressed local economy and has little appeal for potential buyers.

Additional reporting by Giulio Piovaccari and Andrea Mandala; writing by Stephen Jewkes; editing by Keith Weir, David Evans and Leslie Adler