Monte dei Paschi di Siena’s complex rescue plan “doesn’t leap off the page as an overwhelming opportunity”, serial bank investor Wilbur Ross has told the Financial Times.
Mr Ross, who backed the rescue of Bank of Ireland and Greece’s Eurobank, was also critical of the “very tight” timeframe that investors have to evaluate the deal to save the world’s oldest bank.
On Friday night, MPS announced that it would ask investors for €5bn in capital later this year, and put €9bn of bad loans into a new vehicle, which will also sell bonds to investors.
Mr Ross said that even if the bank’s existing investors were totally wiped out, investors taking part in the capital raising would still be paying 100 per cent of book value for MPS.
“Most banks in Europe sell at fairly small fractions at book, admittedly because of the unknowns,” he noted. “[Still], it’s hard to see off the top of one’s head that owning this very troubled institution at 100pc of pro forma equity . . . is very cheap.”
His team is evaluating the equity fundraising for MPS but Mr Ross said: “I must confess it doesn’t leap off the page as on overwhelming opportunity.”
He also described the proposals as having “come more or less out of the blue” and said that it could be difficult for him or any investors to “come to a sensible conclusion” within the deal’s timeframe.
“You probably need a little cooling-off period for people to digest it before making big commitments,” he said. “It wasn’t too long ago that people thought MPS was one of the better banks.”
MPS hopes to sell equity in November, after the bad loans are placed into the new vehicle.
According to the billionaire investor, finding backers for the bad loans’ securitisation might be more straightforward. Most of the debt issued will be investment grade, and will carry a government guarantee. MPS’s non-performing loans are being transferred at about 35 per cent of their book value.
“The question is simpler, you have to decide is 35c the right value and will that let you produce a good rate of return if I buy something at it,” Mr Ross said.
Mr Ross was one of the anchor investors who kept Bank of Ireland out of state ownership in 2011. He almost tripled his initial investment of €300m when he sold his shares three years later. However, his investment in Eurobank has proved less lucrative after Greek banks hit multiple stumbling blocks on their road to recovery.