Monte Paschi eyes delay to aid repayments to plug funding gap

Tue Oct 28, 2014 5:20pm EDT
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By Giselda Vagnoni and Silvia Aloisi

ROME/MILAN (Reuters) - Banca Monte dei Paschi di Siena may seek to delay repaying hundreds of millions of euros in state aid to help shore up its balance sheet as it explores strategic options which could include a merger, chairman Alessandro Profumo said on Tuesday.

Profumo and Monte dei Paschi Chief Executive Fabrizio Viola met Economy Ministry officials on Monday to consider the bank's next move after European Central Bank stress tests exposed a 2.1 billion euro ($2.7 billion) capital shortfall.

In a telephone interview with Reuters, Profumo confirmed the meetings had discussed reviewing the deadline for repaying 750 million euros of state aid and said potentially pushing back the schedule should be taken seriously.

"I think it is right to consider this option too," he said, noting that the Bank of Italy had said explicitly that the shortfall after the stress tests would fall to 1.35 billion euros if repayment of the state aid were not counted.

The aid, provided in 2013 in the form of so-called "Monti Bonds", named after former Prime Minister Mario Monti, is due to be repaid in three tranches between 2015-2017.

A senior official said the Treasury was open to the idea, which could gain Monte dei Paschi much-needed breathing space as it seeks to clean up its balance sheet and fight clear of a crisis dating back to its costly acquisition of rival lender Banca Antonveneta in 2007.

"We will not oppose a request from the bank to delay state aid repayment, there is a contract that already sets the conditions for that to happen," Alessandro Rivera, director general for the financial sector at the Treasury told Reuters.

He said that a delay in payments would be preferable to a solution in which the Treasury exchanged part of the loans for shares in the bank.   Continued...

A view of the Monte dei Paschi di Siena bank headquarters in downtown Siena, August 16, 2014.  REUTERS/Stefano Rellandini