Asset sales loom as Monte dei Paschi seeks to fill capital hole

Mon Oct 27, 2014 1:10pm EDT
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By Silvia Aloisi and Pamela Barbaglia

MILAN/LONDON (Reuters) - Italy's Monte dei Paschi di Siena (BMPS.MI: Quote) is likely to have to sell assets to fill a capital hole uncovered by European regulators, with shareholders reluctant to stump up cash after a recent fundraising and would-be buyers of the bank holding back.

Investment bankers say a takeover may be inevitable, but it is not going to happen overnight, leaving Italy's third-biggest bank scrambling to plug at least part of its capital shortfall before it finds a white knight.

The Tuscan lender is close to selling its consumer credit arm and could put its stake in asset manager Anima on the market, the bankers said, adding it might also be able to sell a portfolio of bad loans and issue a capital-boosting bond.

However, they warned it could struggle to get good prices given its position as a forced seller, putting it under pressure to eventually seek more cash from its shareholders and possibly end over 500 years of independence.

"Monte dei Paschi needs to have a near-term plan to raise up to one billion euros through asset disposals," one investment banker said on condition of anonymity due to the sensitivity of the matter, adding that should be its priority ahead of any share sale or attempts to find a buyer for the whole business.

Monte dei Paschi, the only Italian bank to have been bailed out by the state, has been struggling for years to mend its finances after it was brought low by the costly acquisition of rival lender Antonveneta in 2007, just months before the global financial crisis erupted. It was further hurt by a scandal over loss-making derivatives trades.

On Sunday, Europe-wide health checks of the banking industry uncovered a 2.1 billion euro ($2.7 billion) capital hole at the bank, the biggest such shortfall of any of the 130 banks in the European Central Bank's (ECB) tests.

The lender, which has racked up 9.3 billion euros of losses in the past three years, has hired Citigroup and UBS to advise it on its options. It has two weeks to submit a capital-boosting plan to the ECB and nine months to implement it.   Continued...

The entrance of the Monte dei Paschi di Siena bank headquarters is seen in downtown Siena, August 16, 2014. REUTERS/Stefano Rellandini