November 12, 2013 / 11:02 AM / 5 years ago

Carige seen heading towards cash call after writedowns

MILAN (Reuters) - Troubled Italian bank Carige (CRGI.MI) is heading towards a capital hike after hefty writedowns punched a hole into its already weak balance sheet, analysts said, dragging its shares to a two-month low on Tuesday.

A street vendor walks in front of Carige bank in Genoa May 14, 2013. REUTERS/Alessandro Garofalo

The Genoa-based lender said late on Monday it had booked surprise goodwill writedowns on a range of assets worth 1.65 billion euros ($2.21 billion) following queries by Italian market regulator Consob on the value of some investments.

Carige, worth 1.2 billion euros on the market, is emerging as the next trouble spot in Italy’s banking sector after bailed out Banca Monte dei Paschi di Siena (BMPS.MI). Like Monte dei Paschi, Carige is controlled by a charitable banking foundation with strong links to local politicians and businessmen.

Shares in Carige dived 8 percent in early trading, weighed down by expectations of a cash call after the writedowns forced the lender to post a nine-month net loss of 1.3 billion euros.

Italy’s No. 10 bank, one of 15 Italian banks that will be subject to a European Central Bank asset review, said its core bank capital ratio had fallen to 5.8 percent, well below an 8 percent minimum threshold set by the ECB, making a capital increase almost inevitable.

“The bank cannot escape a capital increase,” said Vincenzo Longo, market analyst at Italian broker IG, adding he expected a cash call of at least 400 million euros.

Carige announced in late February it was targeting 800 million euros in assets sale to strengthen its capital base.

The bank is one of a group of mid-sized Italian lenders that have come under the spotlight in Italy as a protracted economic crisis in Italy boosted their share of bad loans.

So far, Carige has pocketed just 100 million euros from asset sales, casting doubt on whether disposals alone could help it find fresh funds.

The Bank of Italy, which has carried out a detailed inspection of Carige as part of a sector audit, said in a confidential report seen by Reuters in September that Carige may need more than 800 million euros to repair its balance sheet.

Carige has recently overhauled its entire board and last week appointed Piero Montani, formerly at rival Banca Popolare di Milano PMII.MI, as the new chief executive with a mandate to turn the lender around.

Montani said late on Monday the bank will need a capital increase, but did not elaborate on the size or the time frame.

“The uncertainties regarding the potential right issue are mounting and we reiterate our prudence on the stock with a ‘hold’ recommendation,” said Italian broker Banca Akros.

At 1040 GMT shares in Carige were down 4.2 percent, underperforming a 0.9 percent fall in the European banking index .SX7P.

($1 = 0.7459 euros)

Additional reporting by Valentina Za; Editing by Lisa Jucca and David Evans

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