LEAKED: Who Profits the Most from Italy’s Banking Crisis?
- LEAKED: Who Profits the Most from Italy’s Banking Crisis?
by Wolf Richter, http://wolfstreet.com/
JP Morgan’s deal “would be great for Italy”: CEO Jamie Dimon.
Bank bailouts are a big profitable business. And the collapsing Italian bank Monte dei Paschi di Siena – whose stock is nearly worthless (€0.25), and which was “rescued” twice by investors since 2014, and which now must get an even larger “rescue” or else – has turned into fee nirvana for investment banks, particularly JP Morgan.
Monte dei Paschi was the worst performer in the EBA’s stress test. Under the adverse scenario, its Tier 1 capital ratio plunged into the negative (-2.4%), meaning that its capital would be more than wiped out.
Now there’s another rescue deal in the works, this one far larger than the prior two that have failed so elegantly to solve the bank’s problems. It involves a consortium of banks, led by JP Morgan, according to CEO Jamie Dimon, and in a secondary role, by Italian investment bank Mediobanca. Monte dei Paschi seeks to raise €5 billion in new capital and sell €9.2 billion in bad loans at a deep discount to get them off its books. And the underwriting fees are going to be extraordinarily juicy.
“Three sources involved in the deal” told Reuters that the banks would extract €250 million in underwriting fees from the equity portion of the deal (raising €5 billion).
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