The probe follows allegations in the Italian press that Banca Popolare di Lodi, with a group of friendly investors, could already own at least 30% of Antonveneta.
On Wednesday BPL declared that it owned 10.82% of Antonveneta; until then it was only thought to hold 8%.
But on March 8, when BPL's declared stake in Antonveneta was just 4.9%, senior managers of ABN and BPL met and compared their positions in the bank. BPL announced the next day: "the advisor was given a mandate to investigate the possibilities and conditions of an agreement."
Yet when Italian newspapers reported the meeting 10 days later they claimed Gianpiero Fiorani, Lodi's CEO, had told the Dutch bank that he and his friends could gather more than 30% of the shares in Antonveneta.
Banca Popolare di Lodi is a highly acquisitive bank and has been building a stake in Antonveneta, apparently with the aim of gaining control of it or blocking ABN's Eu6.3bn cash bid.
Under Italian regulations, when an investor builds up an equity stake of 30% or more in an entity, it must make its holding public and is bound to make an offer for the rest of the shares. Shareholder pacts may not own more than 30% of a company.
Consob is investigating how shares in Antonveneta were acquired and whether there is any sign of parties acting in concert with Lodi.
BPL declared on Wednesday it had "not entered into agreements (involving options or preliminary, futures or conditional contracts, nor agreements to buy or vote shares) in respect of Banca Antonveneta's shares; and it has not entered into a shareholders' pact — in written or other form — with shareholders in the same bank."
Market sources have suggested that ABN Amro asked Consob to investigate shareholdings in Antonveneta. A spokesman for the Dutch bank yesterday said the bank did not comment on its contact with regulators.
"We watch what's going on," he said. "The Italian media is always well informed and on top of everything. There has been so much reported that it is sometimes hard to tell what is true and what is not."
Italian newspaper reports yesterday suggested that Lodi was ready to raise its stake to 15%, having already been given permission by the Bank of Italy. The Bank needs to approve investors raising stakes in banks beyond 5%, then 10%, 15%, 20%, 33% and 50%.
If the report is true, that permission could well have been granted at a three hour meeting that Antonio Fazio, governor of the Bank of Italy, held with Gianpiero Fiorani, CEO of BPL, on Tuesday.
The meeting followed a gathering of Italian bank leaders that Fazio holds regularly.
Fazio and Fiorani areß believed to be on close terms. The details of the two mens' discussions in Tuesday's meeting are likely to remain unclear, though many have speculated that ABN's bid for Antonveneta could have been among the topics.
Fazio is widely acknowledged, not just in Italy but across Europe, to be fiercely protective of the Italian banking sector and to be keen to keep Italian banks under Italian control.
And while BPL has not yet declared whether it will try to block ABN Amro's bid, history suggests that Fiorani is unlikely to give in easily.
His bank has been one of the most aggressive players in the consolidation of Italian banking in recent years and BPL's growing stake in Antonveneta has been seen by many as the precursor to a bid.
Some observers argue that gaining control of Antonveneta may be critical for Lodi, since it is financially vulnerable. That may be a consideration for Fazio too.
Tracking the names
While the exact details of the Antonveneta shareholdings remain unclear, some facts are known.
As well as Lodi's 10.8%, ABN Amro is part of a shareholder pact that owns about 30% in Antonveneta. ABN owns a 12.7% stake, the Benetton family 4.8% through its Edizione Holding, shareholders from Italian fiduciary Deltaerre nearly 10%, and insurer Lloyd Adriatico 2.7%.
The pact is set to lapse on April 14 and as EuroWeek reported last week, it was ABN's failure to find shareholders with which to engage in a new pact that forced it to come out with a bid for Antonveneta. When the pact expires, shareholders will be free to shift their equity quotas as they see fit.
Outside the pact, shareholders are reported to include Unipol, the financial and insurance group, which has a 2.7% stake; Emilio Gnutti's merchant bank Hopa; Italian financier Marcellino Gavio with around 2%; and real estate developer Stefano Ricucci, who was yesterday reported to have built up a 4.9% stake, though Consob said it believed his stake was just 2.01%.
The Italian press also quoted sources as saying that Ricucci was working with investors including Unipol and Hopa, as well as Lodi's CEO Fiorani, to scupper ABN's bid for Antonveneta.
That view is given weight by an article in an Italian newspaper last week which quoted Angelo Boscolo, head of tourism company Boscolo Group, as saying that there would be "at least a hundred entrepreneurs from Veneto and Lombardy trying their best to acquire 50% of the shares on the market so as to block ABN Amro from acquiring our bank."
Another newspaper said it believed those entrepreneurs already had about 25% of the bank.
Lodi is also thought to have an agreement with the Benetton family regarding its 5% stake through Edizione Holding.
Lodi sought to clarify that situation on March 9 when it said that it had "originally granted Edizione Holding, following the usual credit scoring, a credit line that exclusively stipulates an 18 month repayment period with independent borrowing or, optionally, with the handover of Banca Antonveneta shares, whose ownership and related rights remain exclusively with Edizione Holding."
Edizione head Gilberto Benetton yesterday appeared to refute the idea that Benetton had an agreement to give BPL its shares: "The [ABN] offer is good," he said. "We will have to see what the moves and countermoves will be. We are not linked to any side and we are free to use our stake."
BPL declined to comment to EuroWeek this week and said allegations against it were "totally unfounded and inexcusable", including claims that it had tried to use other shareholders to amass a larger stake in Antonveneta than it had declared.
Too close an examination
EuroWeek also discovered this week that Banca Patrimonio e Investimenti, a stockbroking firm owned by Gruppo Banca Sella, sacked one of its equity analysts on March 14 this year after he published a report arguing that there were weaknesses in BPL's finances.
Gruppo Banca Sella is owned by Maurizio Sella, the president of the Italian Banking Association.
The analyst, Andrew Sentance, wrote his first report on BPL in May last year and was warned verbally by Banca Patrimonio — then known as Gestnord — that he was not to write any more reports on BPL without permission.
He was also told he had to send all reports to the board and ask the head of the Milan office for permission before starting any research.
Sentance was dismissed for a report on BPL he produced and then distributed to press contacts on February 21.
In a letter of dismissal which EuroWeek has seen, Banca Patrimonio e Investimenti said it dismissed Sentance because he divulged to third parties information relative to the financial situation of BPL, information he had come by in his job at Banca Patrimonio.
In particular, the letter alleged, Sentance had divulged that information via the company email and the information was therefore wrongly attributed to Banca Patrimonio. Sentance said this week that he often sent his reports to the press.
On February 21 he sent both his most recent, as well as last May's report on Lodi, to Consob and to Borsa Italia. Sentance said this was his normal practice with new reports and alleged that Consob failed to act on the findings of his report and Borsa Italia did not publish the reports on its website, as it normally does.
EuroWeek put these allegations to Consob yesterday but, having said it would reply, the regulator did not.
'Balance sheet problems' at BPL
In the email that he sent to Consob and to Borsa Italia, Sentance said he believed a recent television programme, Striscia la Notizia, could "be indicative of a wider series of problems within the bank [BPL]".
The programme, broadcast on February 2 and 14, alleged that at the end of 2004 BPL introduced new charges, of up to Eu100 per customer, on its current account holders.
If the allegation is true and the charges were levied on many of BPL's account holders, the result could have been a windfall of tens of millions of euros for BPL.
Sentance's criticisms of BPL, which he emailed to Consob and Borsa Italia, and for which he was sacked, are based mainly on analysis of BPL's interim reports for the first half and third quarter of 2004 — the latest available when his report was published. He also uses other public data, including the 2003 full year reports of other institutions.
Sentance argued that BPL's tier one ratio might be as low as 2.5% once various items were taken into account. These he lists, both in the email and the report:
l "The bank has Eu1.65bn of goodwill and consolidation difference on its books."
l "Bad loans are only 43% covered, rather than 60% as is normal in Italy. Write-ups are averaging only 15% of write-downs, suggesting that asset quality is not high enough to warrant lower coverage."
Sentance added in his report that he would assume a further increase of Eu130m in gross bad loans in the second half of 2004, the same as the increase in the first half. Sentance said this seemed a minimum, given the continuing weakness of the Italian economy.
"Third quarter write-downs of Eu40m would support this view," Sentance said. "Gross bad loans would then be Eu785m, meaning that the bank will have to set aside Eu193m to increase coverage to 60%."
(In its 2004 financial statement, released on March 23, BPL said it had now increased bad loan coverage to 62%.)
l Fondazione di Lucca has three put options to BPL covering shares in Cassa Lucca and Reti Bancarie — now subsidiaries of BPL —, with a total value of Eu610m. They fall due in May, June and December this year.
Holders of warrants in Reti Bancarie also have puts to BPL with a total value of Eu161m of Reti Bancarie and BPL shares. This could cost Lodi Eu26m by the end of May, Sentance estimates. BPL has written a total of Eu1.2bn of put options.
l "The food group Barilla, with whom the bank enjoys close relations, is underperforming, particularly its Kamps arm which was downgraded to B2 by Moody's in September. Lodi owns a 4.6% stake in the holding company of Kamps, Finba Holding Frankfurt."
Claims of overvalued stakes
l In the report, Sentance alleges: "Lodi paid Eu367.5m for a 19.99% stake in CariBolzano, valuing the entire bank, which made profits of Eu26m in 2003 and has equity of Eu604m, at Eu1.838bn. This is the equivalent of Eu502 per share.
"Il Sole [the Italian financial newspaper] reported on August 27 that in July this year, Bayerische Landesbank sold its stake in CariBolzano at the equivalent of Eu220 per share. This values Lodi's stake at Eu161m, some Eu206.5m lower. While Lodi may enjoy a slight premium because of the larger stake, now that the Bolzano foundation has majority control of the bank, I don't think this is worth a great deal."
l "Popolare di Lodi's stake in Hopa is valued at Eu197m for a 4.982% stake, or Eu3.952bn, whilst shareholders' equity is only Eu2.712bn. This would imply a value of Eu135m, or a write-down of Eu62m."
l "The stake in the Bank of Italy is worth Eu58.7m for 1.225%. Unicredito values its 11% stake at Eu54.9m, whilst Intesa's 22% stake is worth Eu348m, Capitalia's 11.1% stake Eu230m, and San Paolo's 8.33% at Eu185m. All are under half the value assigned by Lodi."
Sentance said that while these comments "might seem extreme", a Banca IMI report released on February 2 said: "In terms of tier 1 the exercise of these [put] options (Fondazione Lucca, Pisa and Livorno for Eu600m) could cost 180 bps. According to the latest rumours, the bank is looking to negotiate a solution with the various foundations, such as a share swap or partnership, looking to avoid the capital increase that would otherwise be necessary."
BPL has already conducted five capital increases since 1998.
The conclusion drawn by Sentance and in sections of the Italian press is that the bank is in urgent need of further capital and might have to make another capital increase, whether it bids for Antonveneta or not.
However, BPL's liquidity, at least, should have been helped this week by its launch yesterday of a Eu750m three year floating rate note through joint leads BBVA, Deutsche Bank and Dexia Crediop.
According to Dealogic's MTNware, BPL has Eu1.437bn of debt maturing this year, of which Eu1.4bn falls due in July and August. Including this week's deal, it has issued Eu1.73bn of debt so far this year.
Also of help, if reports are true, are claims that the Bank of Italy is considering relaxing its ruling on how International Accounting Standard 39 should be treated. According to some, the Bank's changes could minimise the effect of balance sheet puts, a change that would be of great help to BPL.
Obstacles to Lodi bid
The nature of BPL's finances, as alleged by Sentance and backed by other banking analysts EuroWeek spoke to, suggest that it is unlikely to mount an actual bid for Banca Antonveneta.
"At Eu25 a share, ABN is offering a very attractive price for Antonveneta, about 19 to 20 times earnings multiples — higher than the trading average for the Italian banking sector — and what's more, ABN is offering cash," an Italian banking credit analyst in London told EuroWeek yesterday. "Lodi lacks the resources to come close to matching that bid, and certainly could not offer cash and would be forced to offer shares instead. But it would be very naïve to think this will be decided on economic grounds alone."
BPL shares were yesterday trading at Eu8.76 each, giving the bank a market capitalisation of Eu3.24bn. Meanwhile Antonveneta rose to record prices at Eu26.3 a share, for a capitalisation of Eu7.35bn.
"Lodi is not a strong credit, it is not profitable and it has grown through acquisitions," said another banking analyst in London. "That makes it very difficult to assess what value has been added to it — if any — and means the bank's profile has changed vastly on an annual basis."
