Italy's Intesa halts dividends, says crisis boosts case for UBI deal
By Valentina Za
MILAN (Reuters) - Italy's Intesa Sanpaolo on Tuesday suspended dividend payments to comply with regulatory demands and said the coronavirus crisis strengthened the case for its proposed takeover of rival UBI Banca <UBI.MI>.
Just before Italy got hit by coronavirus contagion in late February, Intesa unveiled a surprise bid for UBI to create the euro zone's seventh-largest banking group with a focus on asset management and insurance.
The pandemic, which is dragging euro zone economies into a deep recession due to containment measures, has changed the context for what would be the biggest banking deal since the global financial crisis.
"The strategic rationale for the transaction takes on even stronger significance in the aftermath of the COVID-19 epidemic," Italy's biggest retail bank said in a statement.
Intesa said it was more difficult for smaller lenders to confront the economic fallout from the virus emergency, which is seen stoking problem loans and hammering bank revenues.
Intesa said a merger would make it easier to cut costs and shoulder provisions against loan losses, adding size mattered more than ever.
UBI has given Intesa's proposal the cold shoulder and some of its investors have rejected it altogether, though analysts say the emergency may prompt a change of mind.
Chief Executive Carlo Messina expressed confidence Intesa would be able to return to its customary high dividend policy in the coming months thanks to its strong capital position.
Yielding to a European Central Bank recommendation, Intesa on Tuesday suspended plans to pay shareholders 3.4 billion euros (3 billion pounds) in dividends this year.
Intesa said the move, which follows that of domestic rival UniCredit <CRDI.MI>, would boost its pro-forma core capital ratio to 15.2%, giving the bank 16.5 billion euros in excess capital on top of its minimum capital requirement.
The capital buffer is even higher when taking into account a regulatory decision to temporarily loosen capital rules.
While rushing to flood the system with liquidity and ease requirements, the ECB has also asked euro zone banks to halt dividend payments and share buybacks until at least early October to better support the economy.
Intesa said that depending on the ECB's stance after Oct. 1 the bank would call a shareholder meeting after that date to pay out part of its reserves to shareholders.
CEO Messina said he was donating 1 million euros of his 2019 bonus pay to support healthcare projects to fight the virus, while another 5 million would be donated by the 21 top managers reporting directly to the CEO.
(Reporting by Valentina Za, editing by Jane Merriman and Mark Potter)
