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Monte dei Paschi delay shows how toxic this UniCredit deal is

With local elections fuelling the political sensitivity of UniCredit’s mooted MPS deal, it will be even harder for CEO Andrea Orcel to secure both national support and investor returns.

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Despite centrist Enrico Letta’s victory in a bruising local by-election, it is clear that chief executive Andrea Orcel and his bank UniCredit will not become heroes in the saga that still surrounds Banca Monte dei Paschi di Siena (MPS).

That is frustrating, as Intesa Sanpaolo managed to look much more heroic – from both a political and shareholder perspective – in its government-backed purchase of two failing banks in the Veneto region in 2017.

After agreeing pre-conditions for buying MPS in late July, Orcel sounded hopeful that he could sign a deal to buy the bank by the middle of September.

The conditions were that it must be capital neutral, de-risked, and only include the parts that were strategically important to UniCredit. UniCredit has completed its due diligence according to Orcel’s expected timetable.

But mayoral elections and a by-election in Siena could not have come at a worse time, accentuating the deal’s already high political sensitivity.

Rallying point

It is a quintessentially Italian mix of business and politics. Pier Carlo Padoan triggered the by-election when he stood down as member of parliament of Siena a year ago, to become chairman of UniCredit.

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