Ubi to the choice: between the amazing promises of Massiah and the certainties of Intesa

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-> It will be convenient to remain Ubi shareholders or become a member of Intesa with the Bergamo-Brescia bank in your stomach? After all the theme, after months of skirmishes, low blows and bombastic proclamations on the defense of autonomy, it’s all here.

More prosaically it concerns the portfolio of Ubi’s 140,000 shareholders called from tomorrow until 28 July to comment on the offer launched in February by the first Italian bank that wants to incorporate the former popular bank into a new group that will cement the position of undisputed leader of the Italian banking system.

agreement sanpaolo 05

Looking at the prospects and especially the history and recent past of the two banks, as we will see, no doubts should arise. On the one hand, that of Ubi, Have you got a bank that promises to make it on its own and that in spite of the pandemic Covid claims to be able to guarantee satisfactions in the coming years. Estimates of the new updated business plan say that Ubi will make profits in 2022 for 562 million, with a return on tangible equity of 7.1% is 330 million more than in February of possible dividends of 840 million in the three coupon years.

To look at it so it seems tempting, but it should not be forgotten that theoretical assumptions are made which will be confirmed by reality. And here more than an industrial plan it seems a powerful act of faith. For the bank, managed by Victor Massiah, it seems that Covid is a flip. There Pandemic will hurt the bank on profits for only 100 million, since in February the plan foresaw 665 million profits by 2022 lowered today to 562 million. There return on capital falls by only one percentage point and the cost of credit rises by only 85 basis points. Not only. Ubi in the post Covid will make less profit but can give more dividend. A paradox seen up close that sounds like a flattery to members.

UBI Banca

Another act of faith appears in the new plan: the assumption that the cost of credit will rise by only 85 basis points, equal to approximately 700 million new credit losses. It seems very optimistic given that all analysts expect a future strong increase in new non-performing loans deriving from corporate bankruptcies.

So a negligible impact as if the pandemic did not concern Ubi. Forecasts marked by great optimism: moreover, if you are under attack it is difficult to say that things will go wrong. The best defense is to show off strength. The end result is that Ubi’s top managers draw a scenario where Ubi reaches a peak of maximum profitability own in the midst of the serious pandemic which has and will have violent impacts on the economy and therefore on banks.

The estimates of the new plan indicate 2022 net profit growth of over 60% on 2019 profits, when all analysts take it for granted a contraction of at least 20% of profits for the entire banking system. Credible in the midst of the Covid storm?

Understanding is much less emphatic about profitability estimates. In the assumptions on the new entity provides for a net profit of 5 billion in 2022. Prudent estimate given that the agreement in the 2018-2021 plan (therefore pre-covid) assumed 6 billion profits at the end of 2021.

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