At the end of last week two of the Fiat Group's major banking shareholders sold the bulk of their stakes, the first sign that individual members of the consortium who took up a 27 pct share in the Italian carmaker last autumn are now selling up. The consortium of banks converted a 3 billion euro loan given to Fiat in 2002 into a 27 pct stake last September, the preferred option favoured by Fiat CEO Sergio Marchionne.

Since September 2005 Fiat Group shares have continued to rally, rising to trade at over 8 euros, and two banks last week took advantage of this buoyant state of affairs, although the share sales last week were well below the banks' fixed conversion price of 10.28 euros per share. Banca Monte dei Paschi di Siena SpA announced on Friday it has sold its entire allocation of around 29 million shares (close to 2.5 pct of Fiat's capital) to JP Morgan and Goldman Sachs, two institutions that have recently positively rated Fiat's shares.

At the same time Sanpaolo IMI Bank issued a statement to the market in which it revealed that Merrill Lynch and Banca IMI had been authorised to sell its 3.55 pct stake in the Fiat Group, around 39 million shares, placed at 7.70 euros, well below the conversion price. After the sale Sanpaolo IMI will continue to retain a 0.837 pct stake in Fiat, which is held via its IMI Investiment division. The two share sales caught analysts by somewhat by surprise considering that the stock price has recently risen to fresh high levels, and while Siena-based BMPS have little history of association with the Fiat Group, Sanpaolo IMI, who are like Fiat, headquartered in Turin, have had long links with the Fiat Group, including a major position in leading the banking consortium that recently took up a minority stake in the Italian carmaker's Ferrari sportscar division.

"We are not worried by some banks selling all their Fiat stakes following the mezzanine loan, and we always said we were willing to cooperate with them to place the shares on the market," Italian news agency AGI reported Fiat CEO Sergio Marchionne as stating.
 

"When transactions such as these are made, it is normal for the stake seller to inform the company pre-emptively. We were only informed by MPS, which always said it would sell its stake." Marchionne also added: "Fiat shares have appreciated considerably, and are expected to increase further, following the results obtained so far and those expected in 2006 and 2007. Our hard industrial and financial work was also praised by rating agency Fitch, which reviewed up its outlook for us."

Capitalia Group (who hold a 3.7 pct stake) will not sell its Fiat stake, AGI reported financial insiders as telling it, who reiterated that the bank will keep on supporting Fiat shares despite Friday's results, when in late afternoon trading Fiat stock was down by 3.34 pct, dragged down by Monte dei Paschi di Siena and Sanpaolo IMI's decision to sell their stakes. AGI added that financial analysts are now waiting to see what the other Fiat shareholding banks - Intesa (with 5.7 pct), Unicredit (5.5 pct), BNP and ABN Amro (1.3 pct each) - will do in light of these two sales. A trader told AGI that "MPS and San Paolo selling Fiat is due to the stock's recent rally."

Fiat shares have been trading consistently above 8 euros a share for sometime now, a value which they hadn't reached since Sept 2003. Nine months ago, the stock was worth just over 4 euros. The rise in stock value has been driven by the positive sales trend of several models, new strategic alliances which have been forged, and the expectation, according to Marchionne, that the Auto Division will enjoying a return to profits during 2006. Attention now focuses on the Group board meeting, due on 30th Jan, which will approve the 2005 full year balance sheet. "It should be aligned to expectations, or possible be even better", Marchionne assured reporters during the North American International Auto Show in Detroit last week.