Bailout candidate Pop Vicenza posts big loss, bleeds deposits

Italy's Banca Popolare di Vicenza posted a 1.9 billion euro ($2 billion) loss for 2016 and said it was bleeding deposits, raising doubts over whether regulators will deem the regional bank viable and approve its request for state aid. Popolare di Vicenza and local peer Veneto Banca this month asked the Italian government for a bailout, following in the steps of Italy's fourth-largest lender Monte dei Paschi di Siena.
The two Veneto-based banks were rescued from bankruptcy less than a year ago by state-sponsored, privately funded banking industry bailout fund Atlante, which has pumped 3.4 billion euros into the two lenders.
They are estimated to need another 5 billion euros to stay afloat but European authorities have yet to declare them solvent and approve their restructuring plans.
"State intervention appears as the most realistic option to recapitalise the bank as tapping markets looks hard," Popolare di Vicenza said. Its proposed merger with Veneto Banca - which still has to release its 2016 results - was "indispensable" for its restructuring, it said.
Popolare di Vicenza said losses stemming mainly from 1.1 billion euros in writedowns of doubtful loans had pushed its core capital to 8.21 percent in 2016, below a 10.25 percent threshold set by European Central Bank supervisors.
It also said a key indicator of its ability to meet short-term cash outflows - the liquidity coverage ratio - fell to 38 percent at the end of last year, well below an ECB threshold of 90 percent, after it lost 3 billion euros in direct funding. The ratio stood at 113 percent in June.
The bank said its liquidity position improved in January when it issued 3 billion euros in bonds guaranteed by the state but had worsened again in March as concerns the lender could be wound up prompted customers to withdraw money.
Unlike Spain and Ireland, Italy failed to help its banks before strict rules limiting state aid to lenders kicked in last year, which now impose losses on bank's creditors and large depositors before tapping public money.
Rome is trying to prop up its most vulnerable lenders under an exception to those rules as thousands of ordinary Italians hold domestic banks' shares and bonds.
Popolare di Vicenza, which lost 3 billion euros in 2014-2015, said it expected further significant loan losses this year due to new guidelines it received from the ECB after a loan audit last year.