MontePaschi CEO says lending held up at end of 2009

DAVOS, Switzerland (Reuters) - Italy’s Banca Monte dei Paschi di Siena, the world’s oldest bank, said its lending ticked up at the end of last year as loans made by Italian lenders to retail and corporate customers seemed to stabilize.

The economic crisis that gripped major economies last year as a result of the 2008 credit crisis hit bank lending, but there were signs of improvement at the bank.

"In Italy, lending has held up," Antonio Vigni, Chief Executive Officer of Monte Paschi BMPS.MI told Reuters in an interview on Friday on the sidelines of the World Economic Forum.

“(Monte Paschi) had a marginal improvement in the month of December, up 0.4 pct from a year earlier, mostly thanks to a recovery in consumer lending,” he added.

“Corporate lending was slightly weaker but we are now in a recovery phase and we saw a general improvement in November and December.”

Vigni said its bank, which had to accept 1.9 billion euros ($2.67 billion) of aid in the form of a special government bond issue, said the bank had cut structural costs by between 5 and 6 percent by the end of 2009, adding it planned to repay the bonds in 2013.

“We will continue with a further cost reduction.”


Analysts have said Monte Paschi, which entered the crisis with a thin capital buffer due to the acquisition of Banca Antonveneta, needs to strengthen its capital ratios in view of upcoming stricter financial rules on regulatory capital.

But Vigni said Italian banks, which tend to focus on retail banking, should be allowed to enter the new regulatory regime gradually as they tend to be retail banks with a limited investment banking focus.

In Italy, retail banking on average makes up 70 percent of a bank’s total income, compared to the European average of about 60 percent.

“Monte Paschi is in line with the Italian average and the predominance of the retail business points to a different risk profile than that of banks focused on other banking activities,” he said.

“We would like to see (regulators) reflect on this and hope for a timing that takes into account the specifics of Italian banking.”

The new rules place a greater focus on the quality of the capital banks put aside against risk and are due to come into force in 2012.

Leading Italian banks Intesa Sanpaolo ISP.MI and UniCredit CRDI.MI both have had to strengthen their capital bases.

Bank of Italy Governor Mario Draghi, who also heads the international Financial Stability Board, has repeatedly stressed the need for a sound capital base for Italian banks.

Monte Paschi has taken steps in 2009 to boost its capital base by more than 120 basis points, mostly through asset sales. Its Tier 1 ratio, a measure of capital strength, is now 7.6 percent, including the special government bonds.

“We consider our capital ratios adequate in the current environment,” Vigni said, adding he did not envisage further sales of branches.

($1=.7122 Euro)

Editing by Hans Peters