Italy’s Top Banks Said to Seek Up to $40 Billion From ECB

Aug 28, 2014 9:49 am ET

(Updates to add Mediobanca, Pop. Emilia to total from first paragraph.)

Aug. 28 (Bloomberg) -- Italy’s seven biggest banks are seeking to borrow as much as 30.3 billion euros ($40 billion) in the European Central Bank’s first auction of cheap cash designed to boost loans to companies and individuals, according to people with knowledge of the plans.

UniCredit SpA, the nation’s largest lender, is asking for 7 billion euros in the September auction, said one of the people, who asked not to be identified because the information isn’t public. Banca Monte dei Paschi di Siena SpA, Italy’s third- largest lender, will bid for 3 billion euros, about half of the total it’s targeting this year, another person said. Mediobanca SpA is seeking 1.5 billion euros, according to another person.

The loans, known as targeted longer-term refinancing operations, or TLTROs, are part of a historic package of ECB measures to expand credit to businesses and households and revive growth. The ECB’s previous injection of long-term funds in 2011 and 2012 failed to boost lending because banks invested in sovereign bonds instead. The euro area posted zero growth in the second quarter as its three biggest economies -- Germany, France and Italy -- didn’t expand or contracted.

‘Looks Attractive’

“The measure looks attractive for banks, even if they don’t have the same liquidity urgency of three years ago,” said Karim Bertoni, an analyst at de Pury Pictet Turrettini & Cie. in Geneva. “Lenders don’t need to seek the maximum amount available immediately because they have alternative funding sources.”

Banks across the 18-nation euro area will probably borrow about 110 billion euros in September and 160 billion euros at the next auction in December, Giuseppe Maraffino, an analyst at Barclays Plc in London, wrote in a note to clients Aug. 21.

The Italian banks’ requests may be below some analysts’ estimates. Antonio Guglielmi, a London-based analyst at Mediobanca SpA, estimated that the seven biggest banks would seek 35 billion euros in September.

To participate in the first auction, banks must submit data on their loan books to their national central banks by 3:30 p.m. local time today. Lenders can apply for funds from the ECB at 10 basis points above the benchmark interest rate, which was cut to a record low 0.15 percent in June. A second auction will follow in December.

Intesa Sanpaolo

Six operations in 2015 and 2016 will offer banks that increase loans to the real economy the chance to borrow as much as three times the amount of their net lending and keep the funds for four years.

Intesa Sanpaolo SpA, Italy’s second-largest bank, has said it plans to get 13 billion euros of TLTROs. It is still weighing the amount it will request in the first auction, and a decision will be taken just before the auction depending on the bank’s cash position, said another person.

Banco Popolare SC, the No. 4 lender by assets, submitted loan data to obtain as much as 3.8 billion euros in September, the total amount the bank has said it is after, another person said. It will decide whether to split the amount between the two offers this year in early September, according to the person.

Unione di Banche Italiane Scpa doesn’t plan to apply for the first auction, the bank has said, adding it may borrow 3 billion euros in the December offering.

Mediobanca and Banca Popolare dell’Emilia Romagna SC, Italy’s sixth-largest and seventh-largest banks, have also applied to borrow funds from the ECB in the first auction, two people said.

Pop. Emilia is seeking to get as much as 2 billion euros, even if it will probably ask for a lower amount in September, another person said.

UniCredit’s Plans

Officials at UniCredit, Intesa, Monte Paschi, Banco Popolare ans Popolare Emilia declined to comment, as did a spokeswoman for the Rome-based Bank of Italy.

UniCredit Chief Executive Officer Federico Ghizzoni said this month the bank would seek as much as 15 billion euros this year, while Monte Paschi Chief Financial Officer Bernardo Mingrone has said the bank will ask for 6 billion euros.

UniCredit’s initial request will be tied to Italian loans, and the bank plans to bid for an additional 7 billion euros to 8 billion euros linked to loans at its German and Austrian units in the second auction, the person said.

Economists in the Bloomberg Monthly Survey in August estimated that banks will borrow 650 billion euros through 2016. ECB President Mario Draghi said in July that the maximum size of the program may be about 1 trillion euros.

--With assistance from Francesca Cinelli in Milan.