Italy presses Monte Paschi to complete $4 billion cash call

Mon Dec 30, 2013 9:52am EST
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By Valentina Za and Giuseppe Fonte

MILAN/ROME (Reuters) - The Italian government has urged Banca Monte dei Paschi di Siena (BMPS.MI: Quote) to complete its planned 3 billion euro ($4 billion) cash call and avoid the threat of a state takeover after a stand-off between management and shareholders.

The world's oldest bank, reeling from derivatives losses and weakened by years of economic crisis, needs fresh capital to pay back part of the 4.1 billion euros in aid it received this year from the government under former Prime Minister Mario Monti.

But plans for the rights issue were disrupted on Saturday when the main shareholder foundation forced a share sale to be delayed until mid-May, defying Chairman Alessandro Profumo who was pressing for the operation to be wrapped up in January.

The unprecedented clash between management and shareholders has left Profumo's turnaround plans and the future of the bank in question, with the prospect of nationalization looming if the capital hike is not completed before the end of the year.

A spokesman said the Treasury was working to ensure the capital hike went ahead despite the delay. "The Treasury's objective is to see that the capital increase is implemented, that the bank is not nationalized and that it repays the Monti bonds," he said.

Italy's government, struggling to rein in the world's fourth-largest public debt, can ill afford to take over a bank that is on track to post its third straight annual loss after losing nearly 8 billion euros over 2011 and 2012.

However it was unclear what the Treasury could do to bridge the differences between the bank's top management, which may now resign, and the cash-strapped local banking foundation which controls Monte Paschi.

Economy Minister Fabrizio Saccomanni has responsibility for overseeing the banking foundations and has been in touch with both sides, but his options are largely restricted to arm-twisting and pressure.   Continued...

The Monte dei Paschi bank headquarters is pictured in Siena August 16, 2013. REUTERS/Stefano Rellandini