Monte Paschi vies to stay private
By Silvia Aloisi and Stefano Bernabei, ReutersMILAN/ROME--Italy's scandal-hit Monte dei Paschi di Siena will next week unveil a drastic turnaround plan for the bank to meet European Union demands and try to lure investors in a make-or-break attempt to avoid nationalization.
September 21, 2013, 12:07 am TWN
Italy's third biggest lender was brought close to financial collapse by the eurozone debt crisis and is engulfed in a judicial probe over its costly purchase of a rival in 2007 and loss-making derivative trades it made in the deal's aftermath.
The bank, which took 4.1 billion euros (US$5.5 billion) in state loans in February, has been told to beef up an already tough restructuring plan if it wants to win the European Union's approval for the bailout.
Brussels has also demanded that the Tuscan lender carries out a 2.5 billion euros capital increase in 2014. That is more than double the 1 billion euro originally planned by the bank and roughly equal to Monte dei Paschi's current market capitalisation, making it a very challenging goal.
“At the moment there seems to be little interest in Monte dei Paschi among investors, either from a strategic or financial view point,” Societe Generale analyst Carlo Tommaselli said in a report this week. “The execution risk ... is high.”
EU Competition Commissioner Joaquin Almunia has said that if the bank, the world's oldest still in business, cannot raise the funds in the market, the government would have to convert its loans into shares in the bank, thus taking it over.