By Stefano Bernabei and Andrea Mandala
ROME/MILAN (Reuters) – A potential 1.4 billion euro ($1.6 billion) capital shortfall at Banca Popolare di Bari is a base assumption which must be confirmed by an analysis of the ailing Italian bank’s assets and risks, one its temporary administrators said on Wednesday.
Last December, Popolare di Bari became the latest Italian bank to be rescued when a depositor protection fund financed by Italian banks (FITD) committed to covering up to half of an estimated capital increase of 1.4 billion euros, approving an immediate cash injection of 310 million euros.
“The bank certainly requires a capital increase, but it is not possible to give an exact amount yet,” one of the bank’s administrators told a parliamentary hearing.
A detailed assessment of the bank’s assets, in particular its loan book, and of potential legal risks is necessary to be able to put a number on the capital injection needed, the administrator said.
Half of Banca Popolare di Bari’s capital increase will be financed by state-owned Banca del Mezzogiorno-Mediocredito Centrale (MCC), tapping up to 900 million euros in funds provided by the government in an emergency decree in December.
“We think there may be many synergies between the two businesses”, MCC CEO Bernardo Mattarella told the hearing adding that the rescue deal for Popolare di Bari could pave the way for the bank to then merge with smaller rivals.
Italian authorities back in 2018 had examined a project to merge Popolare di Bari with other unlisted cooperative banks.
Italy’s biggest bank in the south, Popolare di Bari has resisted changes brought forward by a 2016 reform aimed at forcing large cooperative lenders to turn into regular joint-stock companies to improve governance and management accountability.
Mattarella said that the due diligence process at Popolare di Bari was expected to close by mid-March to be followed by a shareholder meeting to approve the joint-stock company transformation by the end of June.
Shedding the cooperative status, which gives shareholders one vote each regardless of the size of their stake, is a necessary step for Popolare di Bari to receive the fresh capital injection.
The bank has 70,000 small shareholders who are likely to see their investment wiped out by the capital increase.
(Editing by Valentina Za and Nick Macfie)