Banca Popolare di Vicenza SCpA’s owners approved a plan to raise as much as 1.8 billion euros ($2 billion) in an initial public offering and transform the cooperative lender into a joint-stock firm, a crucial step toward ensuring its survival.
The proposals passed at a meeting in Vicenza, Italy, after the European Central Bank (ECB) warned that without a capital increase the bank could be resolved, imposing losses on creditors. The ECB, which is stepping up pressure on Italy’s weakest banks, also told Banca Carige SpA in a letter last month to submit a new funding plan after losses widened and deposits shrank.
The two are just the most recent of the country’s lenders to draw special attention from the ECB, which has pushed to shore up euro-area banks since taking over as supervisor in late 2014. The central bank has told Banca Monte dei Paschi di Siena SpA, Italy’s third-largest lender, its future may depend on finding a buyer, and earlier this year asked at least six banks — including UniCredit SpA, the biggest — to submit more data on bad loans.
“Italian banks are on the ECB’s radar right now, considering there are plenty of weaknesses,” said Giuseppe Sersale, a partner of Anthilia Capital Partners Sgr SpA in Milan. “News of the ECB’s recent actions revived concerns over the fragility of the country’s banking industry.”
An ECB spokesman declined to comment on issues at individual banks.
Some Italian banks are struggling to boost profitability and capital after bad loans climbed to 360 billion euros, a mountain of doubtful debt that’s hindering lenders from making fresh loans and holding back an economic recovery. The situation for weaker banks deteriorated in recent months after the bailout of four regional lenders imposed losses on bondholders, causing fright among banking customers — traditionally among the largest holders of such debt — and spurring a flight of deposits.
“Problems with Italian banks are of a confidence nature,” said Gianluca Ziglio, a strategist at Sunrise Brokers LLP in London. “On the domestic side, there is a growing concern about the safety of banks after the implementation of bail-in rules, while on the international side investors are looking with concern at the sector given the performance of the loans Italian banks have given.”