UniCredit CEO says July terms for MPS deal needed to reassure market

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FILE PHOTO: The UniCredit bank logo in the old city centre of Siena, Italy

MILAN -UniCredit set strict terms in July for a potential merger with Monte dei Paschi to reassure investors in relation to a deal that could be perceived by markets as being forced onto the bank by politics, CEO Andrea Orcel said.

Addressing a parliamentary hearing on Monday, Orcel said the markets’ reaction when UniCredit announced exclusive talks with Italy’s Treasury over Monte dei Paschi (MPS) had shown the approach was the right one.

Orcel said he was “sorry at a personal level” that the deal had failed, but UniCredit had to “rigorously apply” its own risk and accounting models in its due diligence analysis on MPS.

The result – in addition to a valuation gap on some items – was that the capital injection deemed necessary by UniCredit surpassed the Treasury’s expectations and none of the solutions UniCredit had proposed to reduce it worked out.

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“On the other hand, a smaller recapitalisation … would have meant for UniCredit to clinch the deal on different terms than … publicly announced and backed by the bank’s stakeholders,” he said.

“To reach an accord on conditions not in line with what had been agreed would not have been in the interest of UniCredit, its shareholders and, in my opinion, also of the stability of the national banking system.”

(Reporting by Valentina Za; editing by Agnieszka Flak)