BPI winds down derivatives positions

Lodi’s Banca Popolare Italiana (BPI) has significantly wound down its derivatives positions and lowered its risk profile since September 2005, when it was in the middle of a failed take-over bid for Banca Antonveneta under previous chief executive Gianpiero Fiorani, who was subsequently ousted and arrested.

BPI closed 2005 with a net consolidated loss of €743.9 million, which the bank said was “heavily impacted by €1 billion in provisions and adjustments”. But it claims the loss is “countered by positive consolidated balance sheet figures”.

In September 2005, BPI’s total derivatives exposure totalled €1.96 billion, consisting of €1.31 billion of interest rate derivatives and €653 million of currency derivatives. By March 2006, the total exposure was wound down to €447 million, consisting of €380 million of interest rate derivatives and €67 million of currency derivatives.

BPI said its positions in ‘complex derivatives’ were now closed, while it has also executed loan writebacks of almost €400 million along with shareholding writebacks and other ‘extraordinary items’. The bank has also cashed in 47%, or €473 million, of its investments in hedge funds.

The controversial bid for Antonveneta was allegedly backed by Antonio Fazio, the Bank of Italy governor, until the end of last year, despite a more favourable tender from Dutch banking group ABN Amro. The affair put Italian banking governance under the spotlight for much of 2005, leading to Fazio’s subsequent resignation under inauspicious circumstances on December 19.