June 19, 2018 / 8:23 AM / 3 months ago

UPDATE 2-Italy's doBank to free up capital in acquisition push

* Italy's biggest debt servicing firm presents 3-year plan

* To reorganise to shed bank status

* Looking for targets in Italy, Greece and neighbouring countries (Recasts from presentation)

By Pamela Barbaglia and Valentina Za

LONDON/MILAN, June 19 (Reuters) - Italian debt collector doBank is planning a reorganisation to free up capital as it hunts for acquisitions in southern Europe under a new business plan announced on Tuesday.

With 88 billion euros ($102 billion) of assets under management, doBank is the biggest debt recovery firm in Italy, where a deep recession that ended in 2014 has turned the country into the largest European market for soured bank loans.

Its top executives dismissed analyst concerns that the Italian market could suffer due to political uncertainty after a new anti-establishment government came to power this month.

"We're positive ... today the approach of the government is more prudent ... after the reaction of the market," CEO Andrea Mangoni told an investor presentation in London, referring to a bout of market turbulence as the new government was formed.

He confirmed doBank was interested in the debt collection unit that Italy's third-largest bank Banco BPM is considering selling together with bad debts worth up to 10 billion euros.

DoBank does not buy bad debts directly but teams up with investors that do - such as its 50.1 percent owner Fortress Investment Group - and then services the portfolios.

The group expects to take on the management of a further 15 billion euros in bad loans by 2020 and pay out as dividend at least 65 percent of its income over the period.

By grouping its banking activities in a fully-owned subsidiary and being supervised as a debt servicing company rather than a bank, doBank plans to free itself from the capital constraints to which banking groups are subject.

Chief Financial Officer Manuela Franchi said M&A was the priority but she didn't rule out an extraordinary dividend.

"We set the bar high on acquisitions, we don't need to buy growth ... but we're very focused on it," she said.

The group, which also operates in Greece, targets a revenue increase of 8-9 percent a year on average in 2017-2020, and annual core profit growth of more than 15 percent.

DoBank said it would focus on so-called 'UTP' loans which are not yet in default but are unlikely to be repaid in full.

Mangoni said Italian banks, which have concentrated so far on shedding bad debts, would now start offloading UTPs too, which have a higher net book value and whose management requires more sophisticated skills as borrowers are still in business.

Competition in Italy's debt servicing industry has increased in recent years as foreign investors snapped up collection firms to gain a footing in a soured loan market that peaked at 360 billion euros in 2015-2016.

Fortress, now part of Japan's Softbank, in 2015 bought the debt collection unit of Italian bank UniCredit and merged it with rival Italfondiario to create doBank.

Around 10 years earlier, Fortress-owned Italfondiario had taken over the debt collection business of Intesa SanPaolo .

After rebuilding its servicing unit, Intesa in April agreed to sell 51 percent of it to Europe's biggest debt collector Intrum Justitia as part of a 3.6 billion euro deal.

Mangoni said he did not fear competition from the Intesa-Intrum venture because Intesa's presence could deter major banks from handing over the management of bad loans to the new company.

DoBank started trading on the Milan bourse roughly a year ago, after an initial public offering that valued the company at 704 million euros. Its market value has since risen to around 880 million euros.

At 1318 GMT, shares in doBank were down 0.6 percent, broadly in line with the Milan market.

$1 = 0.8627 euros Editing by Mark Potter

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