Intesa Sanpaolo is Italy‘s 4th biggest Corporate and second biggest bank. It has with 3,900 branches the largest domestic network, 13% market share and 11.1 million clients. It‘s turnover is 49.9 bio $ with a profit of 4bio$. Intesa say that it has particular strength in the wealthiest areas of Italy: strong retail presence covering more than 70% of Italian household wealth. Intensa has branches and represantative offices on every continent.
This conglomerate merges with Banca Populare di Vicenca and Veneto Banca. It pays 1€ for both banks. And that‘s not all. The Italy Government will pay 5.2bio€ Intesa process the merging with the two banks, which have many bad loans they can‘t write off without bankruptcy, so the ECB. 3900 of the 10100 employees will loose their jobs. The 5.2bio€ contain 1.2bio€ to keep jobs Intesa would also cut. 1600 of the 960 affiliates will be closed. Further the Italy government will pay Intesa 12bio€ to write down the bad loans of the two banks into a bad bank. The loss will be devided into parts for the state, the shareholders and
Intesa was dealing hard with the government of Italy, who has no choice than to underwrite that deal. A bankruptcy would lead to social disorder with many protests the government fear. And the two banks would have needed 6.4bio€ imediately to stay alive. And there were no more investors for one of the two banks. Intesa merges with the profitable part of the banks. Bad loans will be written off to bad banks.
The parlament of the EU permits the government of Italy the excemption to process the resolution of Banca Populare di Vicenca and Veneto Banca with the law of Italy. This is possible because none of the banks was relevant to the economical system of Italy. Now the Italy parlament has 60 days to ratify that agreement.
But with this procedure the tax payer will pay 17bio€ for a bailout of two banks. And this the EU wants to avoid and created the SRB. The SRB was created only for system relevant banks. Other banks should file bankrupty, so the EU parlametarians thought. Italy is the fourth biggest economy in the EU. Many banks in Italy have bad loans, so the financial system is very instable now. Italy could trigger the next financial crisis in Europe and EU. So Germany thinks about to extend the SRB to the smaller Banks. This would prevent that states spare shareholders to pay for the losses.
Now the equity holders and the holders of subordinated bonds are supposed to take the first losses. But many of the subordinated or junior bonds are sold to households and individuals. This will be pollitically very difficult for the government. But to inject state funds to soften the impact on private persons will cost hunge amounts and will be against EU rules on states aid.
The Banca Popolare di Vicenza Group was ranked eleven among the Italian banks based on total assets, Veneto Banca is a local bank. The merging of the two banks without risks brings Intensa Sanpaolo a little closer to the leading Uni Credit Group.