CRARY Credit Agricole SA (PK)

Adds shares price, analysts comments, deal details

 
   By Pietro Lombardi 
 

Shares in Italy's Banco BPM SpA (BAMI.MI) trade sharply higher Monday after the bank said it has reached a consumer-credit agreement with France's Credit Agricole SA (ACA.FR) and is pushing ahead with the sale of a multi-billion euro bad-loan portfolio.

The deal with the French bank will boost Banco BPM's capital ratio and help offset the impact of the bad-loan sale, it said late Friday.

Banco BPM will sell its consumer-loans business ProFamily SpA to Agos Ducato SpA, a joint venture between Banco BPM and Credit Agricole, for 310 million euros ($350.8 million) as part of an agreement between the two banks to extend their partnership in consumer finance for 15 years.

Shares in the Italian bank trade 5.2% higher at 1200 GMT.

"Overall, we view these announcements as positive, broadly aligned with our view about [Banco BPM] looking on track to accelerate its de-risking process without further compromising its solvency and preserving Agos' (sizeable) earnings stream," UBS analysts said.

Banco BPM and Credit Agricole will also consider an IPO of Agos in the next two years, the companies said. "Such transaction provides additional flexibility to both shareholders while preserving their respective strong commitment for the future development of the company," the Italian bank said.

Banco BPM will keep its 39% stake in Agos for now, with the French bank owning the remaining 61%. However, should the IPO take place, Banco BPM would have the option to cut its stake in Agos while maintaining a minimum stake of 10%.

The French bank has also granted Banco BPM an option to sell a 10% stake in Agos in June 2021 for EUR150 million. The Italian bank said it is unlikely to exercise the option "given the wide gap between...EUR150 million and the intrinsic value of Agos."

"In our view, pricing and structure of the consumer-credit reorganization are optimal," Deutsche Bank said.

The bank said the consumer-credit deal should have a positive impact on its pro-forma fully loaded CET1 ratio of roughly 80 basis points. This is larger than anticipated, according to UBS, while "earnings power is preserved" as Banco BPM's "stake in Agos remains unchanged."

Banco BPM said it is continuing negotiations with three groups over the sale of up to EUR7.8 billion of bad loans.

This is "well above the targeted amount of EUR3.5 billion previously envisaged in the plan and with a capital impact in any case lower than the benefit coming from the reorganization in consumer credit," it said.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

(END) Dow Jones Newswires

December 03, 2018 07:18 ET (12:18 GMT)

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