January 14, 2020 / 1:50 PM / 9 days ago

Italy's Banca IFIS rules out M&A as it unveils new plan to boost profit

MILAN (Reuters) - Italy’s Banca IFIS (IF.MI) on Tuesday set a 6% annual profit growth target under a new plan to 2022, ruling out any M&A in the near term after failing to strike a deal last year to fold its bad loan business into rival Credito Fondiario.

New Chief Executive Luciano Colombini, who took over after the bank’s controlling family pushed out long-standing CEO Giovanni Bossi, said governance issues had prevented an accord with Credito Fondiario, which is owned by U.S. fund Elliott.

“We’ve remained good friends with Credito Fondiario ... but I don’t think that’s a file which is likely to be re-opened,” Colombini told an investor and press presentation.

Italy’s loan recovery market is under pressure to consolidate after years of stellar growth fed by a 200 billion euro ($222 billion) banking clean-up, as lenders were forced to shed loans that turned sour due to a deep recession.

IFIS, a pioneer in the sector with a focus on unsecured loans such as unpaid bills, had considered teaming up with Credito Fondiario, which specializes in more complex loans typically backed by properties.

Sources have said the deal fell through because IFIS, which would have had minority stake in the joint venture, wanted to retain some operational control on the combined business.

Colombini said IFIS could only consider acquiring a smaller peer that could help it branch out of unsecured loans into more profitable secured ones. However, it was more likely to take on a team of people with relevant skills.

It could also open its bad loan purchasing and managing businesses to minority investors to beef up its capital ratios in an emergency situation, such as an economic slump.

“Lots of funds are interested in our bad loan purchasing business and just as many collectors in our bad loan management activity,” he said.

“Both units have book values well below their market values so a sale would entail a capital gain.”

Under the new plan, IFIS targets net profit of 147 million euros in 2022, up from 123 million euros expected last year, just over half of which came from its impaired loan business.

Controlled by Italy’s Von Furstenberg family and active also in the factoring business, IFIS said it did not expect any major impact in the next three years from tighter European Central Bank rules which force banks to provision in full over time new loans turning sour.

Reporting by Valentina Za; editing by Jason Neely and Mark Potter

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