Monte Paschi doubles planned capital hike to 2.5 billion euros

Mon Sep 9, 2013 4:06am EDT
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By James Mackenzie and Silvia Aloisi

ROME/MILAN (Reuters) - Italy's Monte dei Paschi di Siena (BMPS.MI: Quote) will seek 2.5 billion euros ($3.3 billion) in fresh capital from investors to shore up its finances, an amount that is more than double its original plan and makes nationalization more likely should the cash call fail.

The world's oldest bank, Italy's third biggest, said on Monday it expected to approve a new, tougher restructuring plan on September 24 to win the green light from the European Commission for a 4.1 billion euro state bailout it received this year.

The revised plan, which will include the 2.5 billion euros capital increase to be launched in 2014, is the latest measure in a painful recovery process for the 540-year-old Tuscan lender.

Monte Paschi is still grappling with the aftermath of a massive derivatives scandal which emerged in the wake of its expensive acquisition of rival Antonveneta in 2008.

The size of the planned capital increase, which matches the current market capitalization of the bank and was announced by the economy ministry late on Sunday, underlines the problems still confronting Monte Paschi.

The bank could fall under direct state control if it cannot raise sufficient funds from shareholders.

"There's no chance on the planet that they can raise 2.5 billion euros on the market within 12 months. They are heading towards nationalization," Giuseppe Bivona, a former Goldman Sachs and Morgan Stanley investment banker who has been advising consumer group Codacons in a series of lawsuits against Monte Paschi, told Reuters.

The stock fell 3 percent in early trade to 0.21 euro on Monday.   Continued...

The entrance of Monte Dei Paschi bank headquarters is pictured in Siena January 24, 2013. REUTERS/Stefano Rellandini