ROME: Italy’s Banco Popolare said on Wednesday it did not expect to have to significantly raise bad loan coverage levels above targets already set under the plan for its merger with rival Banca Popolare di Milano. The two banks agreed earlier this year to merge to create Italy’s third-biggest bank. To give the deal a green light, the European Central Bank asked Banco Popolare to improve its bad loan coverage levels by raising 1 billion euros in a share sale.
Italian daily Il Sole 24 Ore reported on Wednesday a team of ECB supervisors had judged Banco Popolare’s bad loan provisions insufficient by 1 or 2 billion euros following a recent inspection. The ECB may set a higher capital threshold for the bank to take into account asset risks, the paper said.
Banco Popolare said provisions it had booked in the first nine months and those planned for the fourth quarter already reflected feedback from ECB supervisors who had not however yet provided the final outcome of their inspection. “Such measures will not modify in a significant manner forecasts (on loan loss provisions) under the merger’s strategic plan,” it said in a note.
