Intesa's Intrum deal brings calm after 'perfect storm' of bad loans
* Intesa approves deal for debt recovery business, bad loans
* Intrum deal prices Intesa's bad debts at book value
* Intesa, Intrum to create Italian debt servicing company
(Recasts after press conference)
By Valentina Za and Gianluca Semeraro
MILAN, April 17 (Reuters) - Intesa SanPaolo's deal
with Sweden's Intrum Justitia shows bad loans can be
sold without a loss and will help Italian lenders turn a corner
after "a perfect storm" of fire sales, CEO Carlo Messina said.
Intesa's board on Tuesday approved a plan by the Swedish
debt collector to buy a 51 percent of a company made up of
Intesa's debt recovery business and Intrum's Italian operations.
As part of the deal, Intesa is offloading 10.8 billion euros
($13.34 billion) in bad loans for 3.1 billion euros.
The sale price for the loans of 28.7 cents on the dollar is
in line with their book value and well above an average of
around 20 cents for Italian bad debts sales over the past year.
"With a deal driven by an industrial logic we made clear
that book values for these assets do reflect their worth,"
"This deal stabilises market conditions for bad loans in
Italy after the perfect storm of bad debts sold at levels that
ensure 20 percent returns to private equity buyers with a
speculative approach," he told a news conference.
Italian banking stocks rallied on Tuesday on expectations
other banks could shed their bad loans at more favourable
Even after painful writedowns that have lowered the net book
value of the worst loans to just above 30 cents on the dollar,
banks have typically taken losses on disposals.
Under pressure from regulators, Italian banks have cut their
troubled loans to some 285 billion euros, from a peak of 360
billion following a deep recession.
Mid-sized players such as Banco BPM or UBI Banca
are widely seen as potential candidates to follow in
Intesa's footsteps and sell their debt collection businesses.
Intesa stands to book a 400 million euro net capital gain
from the deal with Intrum, which is Europe's biggest debt
recovery firm and only last December had bought CAF, a large
Italian debt servicing group.
The Bank of Italy has often warned against fire sales of bad
debts but the country's bigger banks have all bowed to pressure
from European Central Bank supervisors to accelerate the
clean-up through sales.
Messina has often said in the past Intesa had no plans to
make private equity firms richer and on Tuesday he ruled out
other major sales.
The Intrum deal will allow the bank to cut soured loans
below 10 percent of total lending, bringing closer its 2021 goal
of 6 percent - half the current level and broadly in line with
the European average.
"We want to be, we're not ashamed to say it, the best bank
in Europe ... so it was fundamental for us to tackle what was a
focus of attention for the ECB," Messina said.
Intesa will transfer 400 staff to the new company, which
will manage around 40 billion euros in soured debts, becoming a
major player in the Italian debt servicing market, one of
Intrum CEO Mikael Ericson said the partnership with Intesa
would help the Swedish group diversify further away from its
historic specialisation in unsecured consumer loans and target
secured and corporate loans instead.
($1 = 0.8094 euros)
(Editing by Jane Merriman)
First Published: 2018-04-17 14:54:54
Updated 2018-04-17 19:41:57
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