Italian referendum hinders Italian banks’ plans says Fitch
(5 December 2016 – Italy) Fitch Ratings Agency has said plans by Italian banks to raise billions of euros from investors to boost their financial strength have been damaged by the outcome of the country’s political referendum.
Fitch – which said it had a negative outlook on the Italian banking industry for 2017 – said profitability in the sector was already frail before the referendum result that sparked political chaos and forced the resignation of Prime Minister, Matteo Renzi.
“The referendum result could also damage the recapitalisation plans of some Italian banks, most notably Banca Monte dei Paschi di Siena (MPS) and UniCredit, and have negative implications for the broader banking sector, whose attractiveness with investors has already reduced significantly during 2016. The sector’s ability to access the institutional markets for funding and capital, which has become more difficult and expensive this year, could deteriorate further,” Fitch said.
The ratings agency delivered its findings on the sector, which is weighed down with €360 billion (A$510 billion) of bad debts amid attempts to find investors to inject up to €5 billion into MPS, the world’s oldest bank. Senior officials from MPS, which was the weakest of the 51 subjected to stress tests by regulators earlier this year, were in Frankfurt to meet executives from the European Central Bank ahead of an end-of-year deadline to boost its financial health.
Renzi’s resignation has been temporarily frozen by the president, Sergio Mattarella, until the senate passes a budget, perhaps on Wednesday, when a new prime minister from his Democratic party is expected to take over until elections are held.
The referendum, which rejected constitutional reforms favoured by Renzi, was held at a crucial time for the fresh injection of funds into MPS, where the US bank JP Morgan is helping to broker a plan to attract investors to buy its shares.
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