Demutualization, Atlante bail-out and insolvency
Due to Decree-Law N°3/2015, the bank changed from a cooperative limited partnership to Società per Azioni (company limited by shares) in December 2015, affecting the calculation of voting rights (every shareholders had one vote regardless how many shares he had in cooperative society).[7] The Decree-Law required People's Bank with more than €8 billion total assets, had to registered as limited company instead. Veneto also bought back €14,725,910.40 shares (€7.3 per share) as part of the demutualization.[8] The bank also planned to recapitalize €1 billion in early 2016 (due to CET1 ratio was below ECB requirement, set at 10.25%% after 2015 Supervisory Review and Evaluation Process (SREP)[9]), as well as planning to list in the Borsa Italiana in mid-2016. As at 31 March 2016 the bank had a net assets per share of about €15.5, or €3 in nominal value. However, due to low demand of the new shares, the bank priced the new share at €0.5 to €0.1 per share.[10] The stock market listing failed to generate interest, with only one institutional investor taking up the offer and existing shareholders buying just 2.2%[11] (some of them excised rights of withdrew at a later time). As a result, the newly created bail-out fund (created by banking sector in voluntary basis),
However, the bank capital base was deteriorated further due to more write-down on non-performing loans (NPLs), as well as 2016 SREP maintained the requirement on Tier 1 capital ratio for 10.25%,[13] plus unpublished capital recommendation (pillar II guidance). According to the bank, the bank's Tier 1 ratio on 30 June 2016 was 10.74%, just 0.49% higher than requirement.[13] In January 2017, Atlante deposited €628 million as future capital increase.[14] On 2 February 2017 the bank issued €3.5 billion bond with state-guarantee, which would matured in 2019 and 2020 respectively, in order to improve its capital base.[15] A further €1.4 billion state-guaranteed bond were issued on 1 June 2017.[16]
On 9 January 2017 Veneto Banca offered to buy back the shares that were sold from 2007 to 2016 for 15% of the original price, despite the net asset value per unit of those shares had already diluted significantly due to 2016 capital increase.[17] The bank wanted to buy back the shares in order to avoid high legal cost on settlement on accused mis-selling of shares to retail investors and savers. On 11 April, the bank announced that 54,374 shareholders had accepted the offer (around 72.6% of the total number of shareholders), for €248.5 million.[18]
On 17 March 2017, Veneto Banca (and sister bank Banca Popolare di Vicenza (BPVi)) requested a "precautionary recapitalization" by the Italian state.[19] A government bank rescue fund had already set up in December 2016 for €20 billion.[20]
At the same time, the new business plan for year 2017–2021 was announced. Veneto Banca would seek the opportunity to merge with sister bank BPVi. Fabrizio Viola, chairman of BPVi, was also the member of the board of directors of Veneto Banca. However, based on the capital shortfall that forecast by 2016 bank stress test by European Central Bank, Veneto Banca along had a capital shortfall of €3.1 billion in the worst forecast scenario (if setting the CET 1 Ratio target even at worst forecast scenario at 8%).[21] After deducting the contribution from Atlante, the bank seek investor including the government for the remaining €2.472 billion shortfall.
On 3 April, the draft annual report was approved by the board of directors. If excluding the deposit of Atlante for the future capital increase, despite the drop on risk-weighed assets, the greater drop in the capital making the bank had a CET1 ratio (at group level) of just 6.39%, even worse than the level in December 2015 due to heavy loan write-down.[1]
In mid-2017, it was reported that European Central Bank requested the bank have to seek private sector to recapitalize the bank first, in order to reach the solvent criteria for a "precautionary recapitalization" by the Italian Government. However, the major shareholder Atlante had stated that the fund had run out of money to invest, as well as the shareholders behind the fund, the major banks of Italy refused to invest further.
