Acquisition of the oldest bank in the world fails again

Asia's Tech News Daily

Acquisition of the oldest bank in the world fails again

There seems to be no end in sight for the problems with the bank Monte dei Paschi di Siena, the oldest bank in the world. After three months of negotiations, the Italian government and UniCredit management announced on Sunday that the bank would not take over Monte dei Paschi after all. Together with rival Intesa Sanpaolo, UniCredit is considered a heavyweight in the Italian banking world.

The Italian government is the main shareholder of Monte dei Paschi. Rome bailed out the ailing bank in 2017 and today owns a 64 percent stake in the bank. Shortly after that nationalization, Rome already began to look for options to re-privatize the bank. This is also imposed by European rules. Prime Minister Mario Draghi will now have to convince the EU to push the fast approaching deadline of the end of December. Italy is not too concerned about that.

Clap for Prime Minister Draghi

However, the search for another way out becomes more difficult. The Italian government always saw the greatest benefit in a merger of Monte dei Paschi with a larger, healthy Italian player, such as UniCredit. Rome now has two options: find a new buyer, or let Monte dei Paschi stand on its own two feet.

It was still unclear yesterday who that new candidate buyer could be. The banks BPM and Mediobanca were named as contenders. A takeover by a foreign bank seems unthinkable, says the newspaper Corriere della Sera, because the social consequences of such a sale would then be even more difficult to manage.

Read alsoItaly banking crisis is now a real risk

The failed takeover is a blow to both Italian Prime Minister Draghi and Andrea Orcel, UniCredit’s new CEO since April. At the opening of the stock market, not only did the shares of Monte dei Paschi plunge by 9.5 percent, those of UniCredit also fell by 4 percent.

History with Siena and politics

The history of the Monte dei Paschi bank is intertwined with Siena, with Italy and with national politics. The bank was founded in 1472, long before there was talk of a unified Italy. For centuries, the bank has been generous to the local economy. Through the Monte dei Paschi foundation, the bank and the city of Siena gradually grew closer. “The bank was part of a whole institutional system in Siena, which included local companies, local authorities and also the university,” says economic history professor Giandomenico Piluso, who has taught in the Tuscan town for many years. For many years the saying was in Siena: either you work for the bank, or you study to work there, or your pension is with Monte dei Paschi.

How could the bank that had survived for centuries suddenly become so burdened? Monte dei Paschi was struggling with problem loans, but Piluso attributes the loss mainly to the fatal decision at the end of 2007 to buy the Italian Antonveneta bank (which had belonged to ABN Amro) from Santander. “Not only was the price – 9 billion euros – very high, the way in which the purchase was made was also unusual and therefore problematic,” says the professor. “Monte dei Paschi paid the sum in full in cash.”

The international banking crisis, a year later, threw a spanner in the works. The Italian government took the bank’s problems to heart and thus became the main shareholder, and now has to look for a way out of this impasse.

Acquisition of the oldest bank in the world fails again
Source link Acquisition of the oldest bank in the world fails again

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