Italy officials, banks to meet on fund setup to buy shares

Bloomberg

Italian Treasury and central bank officials will meet with executives of major banks, including UniCredit SpA and Intesa Sanpaolo SpA, on Monday to discuss the creation of a fund that would buy shares in bank recapitalizations and help the institutions tackle non-performing loans, according to people with knowledge of the talks.
The Rome meeting will try to finalize discussions held last week to set up a vehicle financed by banks and privately held institutions with a small share to be held by the state lender Cassa Depositi e Prestiti to help the cooperative lenders in sales of shares and bad debt, two people said. They asked not to be identified because the talks are private.
Terms of the deal are still under review and a final agreement may be reached as soon as next week, the people said.
Prime Minister Matteo Renzi is seeking to modernize the industry, reduce an estimated €360 billion in soured loans and bolster a recovery from recession in the euro-area’s third-largest economy. To help clean up the financial system, the government earlier this year struck an agreement with the European Commission, allowing banks to bundle their bad loans into securities for sale, while purchasing a state guarantee for the least-risky portion to make the debt appealing to investors.

Bad Loans
“A number of privately-held institutions are discussing a solution that should address capital and bad loan issues,” UniCredit CEO Federico Ghizzoni said in Milan. “We would consider this as a positive solution.”
Italian lenders rose in last trading session on expectations that a solution for banks issue will be finalized. UniCredit shares surged almost 10 percent in Milan, as Intesa Sanpaoplo SpA, Italy’s second-largest lender rose 6 percent.
Financial institutions are “intensively” working on a solution that would see private investors participate in the fund, Ghizzoni said. The vehicle would be financed by foundations, pension funds and other private firms, while the CDP may have a role as an investor, according to people familiar.