Monte Paschi approves plan to increase cash call to 5 billion euros

Fri Apr 18, 2014 10:19am EDT
 
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By Silvia Aloisi

MILAN (Reuters) - The board of Italian bank Monte dei Paschi di Siena (BMPS.MI: Quote) on Friday approved a proposal to boost the size of a share sale it is planning to 5 billion euros ($6.9 billion) to help cover any gaps a Europe-wide bank check might find in its finances.

Italy's third-largest bank held an extraordinary board meeting after saying this week that it was evaluating how much capital it needed ahead of an asset review by the European Central Bank and after discussions with the Bank of Italy.

CEO Fabrizio Viola said increasing its capital by 2 billion euros more than initially planned would give the bank an extra buffer to plug any gap the ECB review might uncover.

"Having an extra capital reserve of around 2 billion euros allows us to be more tranquil as we undertake this exercise and use this reserve to fund additional provisions should these be necessary," Viola told Sky Italia television after the meeting.

He said the fundraising would also mean the bank could honor its pledge to pay back 3 billion euros of a 4.1 billion euro state bailout this year. The remainder is due to be reimbursed by 2017 but could be repaid early if the results of the ECB review are benign, the bank said.

An extraordinary shareholder meeting was called for May 20 to vote on the bigger cash call proposal. Viola said the bank aimed to launch the cash call around mid-June and have it completed by mid-July.

A banker familiar with the situation told Reuters ahead of the board meeting the extra cash would help Monte dei Paschi increase its buffers against loans turning sour.

BALANCE SHEET CLEAN-UP   Continued...

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