Net Interest - Lindy Bank
It’s been a buoyant time for bank stocks and European governments have taken advantage. Over the past few months, they’ve offloaded billions of dollars of shares they bought to backstop the sector during its period of crisis. From the UK to Greece, banks are being returned to private hands:
All told, European governments have sold around €14 billion of shares of bailed out banks this year – the most since the end of the financial crisis. This week, the Italian government contributed to the flurry, selling a 15% stake in Monte dei Paschi di Siena. It wasn’t the largest sale, nor the last (the government retains an 11% holding) but it could be the most symbolic. Like at Commerzbank, the transaction took place at a premium to market price and rekindled the prospect of M&A: One of the buyers was rival Banco BPM. But Monte dei Paschi di Siena was also considered by many to be unredeemable. The oldest bank in the world, headquartered in one of its most picturesque spots, it was felled by loss, scandal and mismanagement. Over its 552 years as a financial institution (it was founded in 1472!) it has come close to failure on many occasions. As recently as 2021, one of Italy’s largest banks, Unicredit, refused to take it on. Now, profits are up, it has accumulated capital, and M&A is a prospect. Last year, it reported underlying pre-tax profit of €1.3 billion, a much stronger outcome than the €900 million it once targeted for 2026. Third quarter earnings, released last week, beat expectations leading to full-year guidance being raised. And with the government’s stake reduced, the bank is back on track. “We are in the fast lane, boosted by our new business plan, with the conviction that we can go even faster,” said CEO Luigi Lovaglio, a turnaround specialist appointed in 2022, on his earnings call. To delve into (some) of the history of this bank – which was making loans two decades before Christopher Columbus sailed west – and find out how it’s getting on now, read on... Subscribe to Net Interest to unlock the rest.Become a paying subscriber of Net Interest to get access to this post and other subscriber-only content. A subscription gets you:
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