The Mps stock moves in line with the market (+ 0.20% to € 1.02 against an Ftse Mib index up by 0.31%) after the accounts of the first nine months of 2021 and the confirmation that negotiations have started between the Mef and the DG Comp of the EU Commission to obtain an extension with respect to the State’s exit from the capital (64%) of the Sienese bank after those with Unicredit went bankrupt due to a merger. “We will not comment on the negotiations” and the interruption of the same “between Unicredit and the Mef” for the handover of an Mps perimeter “and the rumors circulated about it, often unfounded. I hope that the recent declarations of the Mef, of Unicredit and the quarterly results of Mps help to leave behind all these rumors “, said yesterday the CEO, Guido Bastianini,
Meanwhile, MPS will have to launch a capital increase at market conditions in 2022, but is not yet able to quantify it. The strengthening should take place on a stand alone basis and will in all likelihood see the support of the Mef. Of course, the timing will depend on the negotiations underway with the EU. In any case, the board of directors has already started the revision of the 2022-2026 industrial plan and the planned initiatives will have a significant impact on gross profit. “No indications were given on the timing of the capital increase and the new business plan, but we perceived that the bank is in no hurry, as there is no capital deficit and the management is ready to implement further actions. managerial such as synthetic securitisations to strengthen the capital base “, noted Intesa Sanpaolo this morning. The big question, Bestinver Securities added (rating sell confirmed), is why Unicredit turned away and refused to go ahead with a merger.
In any case, “MPS will go ahead with a capital strengthening move but we don’t know when and how much,” Bestinver said. For over 3 billion euros, a figure of over 5 billion has recently been rumored. But a recapitalization of this size would only be able to cover the bank’s short-term needs, while a long-term solution would require a much higher amount, not surprisingly the CEO of Unicredit, Andrea Orcel, had asked the Mef for an increase in capital of even 7 billion.
Speaking of profit, considering the net effects of the Ppa (-2.7 million euros), the consolidated profit of the group in the first nine months of the year amounted to 388 million, against a loss of 1.532 billion achieved in the same period of 2020. The contribution of the third quarter of 2021, equal to 186 million, is an improvement compared to that of the previous quarter, equal to 83 million and is better than the consensus expectations (loss of about 20 million euros) thanks to provisions and at the lowest costs. Total revenues of € 2.266 billion were achieved, up 3% with an interest margin at September 30 of € 899 million (-8.2%) and net commissions of € 1.113 billion (+ 6%). In terms of capital, as at 30 September the Common Equity Tier 1 Ratio improved to 12.3% (compared to 12, 1% at the end of 2020 and June 30, 2021) and the Total Capital Ratio at 15.9% (from 15.8% at the end of 2020 and from 15.5% at June 30, 2021). Ratio that do not include the profit for the third quarter of this year, including it are equal, respectively, to 12.8% and 16.4%.
Better than expected results, according to Citi (rating neutral), in terms of profit, provisions, Cet1, Npl ratio (4.4% in the third quarter, down from 4.5% in the second quarter 2021) and litigation, stable quarter over quarter at 6 billion. In addition, “Mps management showed confidence during the conference call on the group’s interest margin and on the quality of assets (total gross npl of around 4 billion euros in the third quarter, down 5% compared to the previous quarter and moratoriums on loans at around 3.3 billion euros, -80% compared to the peak of the second quarter of 2020, ed) “, noted Citi, specifying that MPS has indicated regulatory headwinds on risk-weighted assets (Rwa) for around 8 billion euros in the future, but has not forecast any deficit for the third quarter of 2022, better than the previous indications, thanks to the actions implemented on the capital and the evolution of the capital / Rwa. “The Tier 1 deficit could reach around 0.5 billion euros in January 2023, due to the impact of IFRS9 and assuming the full impact of the EBA guidelines in the fourth quarter of 2022, although this could be mitigated by some capital management actions. while, in the absence of debt issues this year, there could be a temporary violation of the Mrel requirements starting from January 2022, which would be remedied with the capital increase “. impact of IFRS9 and assuming the full impact of the EBA guidelines in the fourth quarter of 2022, although this could be mitigated by some capital management actions. while, in the absence of debt issues this year, there could be a temporary violation of the Mrel requirements starting from January 2022, which would be remedied with the capital increase “. impact of IFRS9 and assuming the full impact of the EBA guidelines in the fourth quarter of 2022, although this could be mitigated by some capital management actions. while, in the absence of debt issues this year, there could be a temporary violation of the Mrel requirements starting from January 2022, which would be remedied with the capital increase “.
Even for Intesa Sanpaolo the results exceeded its expectations thanks to the unexpected release of provisions, “while we see a clear strategy for a further de-risking of the balance sheet through an increase in coverage, even in the absence of other NPEs which in any case do not have been excluded by the management. We also see a positive evolution of the interest margin, while the revenues from commissions could be penalized by further actions to improve the capital base which has exceeded expectations “. Same considerations by Barclays, which significantly increased the estimate of net profit for 2021 from 35 million euros to 289 million thanks to the lower cost of risk, while it has more marginally revised the estimates on profits for 2022 and 2023. ” Although MPS has provided encouraging messages, the stock is likely to remain volatile pending decisions regarding capital strengthening actions in 2022 and the business plan, the two catalysts. We therefore maintain our underweight rating on the share with a target price of 1 euro, “Barclays said.
Incorporating in its estimates the positive surprise coming from the cost of risk, which amounted to 132 million in the third quarter, Equita Sim today also increased the forecast of expected profit from 193 to 381 million, but the SIM prefers to remain cautious (rating hold and target price to 1.2 euro) on the Mps share, considering the negative outcome of the negotiations with Unicredit and the uncertainty linked to the revision of the industrial plan and the size of the related capital increase.
Instead, Intesa Sanpaolo suspended its rating and target price and Citi, which has a neutral rating, in any case classified the stock as high risk due to the high level of litigation and the uncertainties regarding the exit strategy of the Mef: “let’s see various risks in this investment case mainly linked to the future of the bank, the recovery of profitability, the potential impact on capital of regulatory trends, as well as the management of risks, such as disputes, in addition to the macro and interest rate context. upside mainly include an M&A transaction and a better than expected potential resumption of business and a positive resolution of some of the ongoing disputes. ” (All rights reserved)

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