Monte dei Paschi BMPS.MI is close to finalizing a consortium of eight banks to guarantee a 5 billion euro ($5.55 billion) cash call the lender plans to carry out to strengthen its balance sheet, a source close to the matter said. The stress test results are due at 2000 GMT on Friday.
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“The discussion is still ongoing, but the board is set to reject the proposal”, one of the sources said.
Monte Paschi is expected by analysts to show the weakest capital levels and the bank’s capital is “at risk”, Il Sole 24 Ore reported on Sunday, citing preliminary indications of the stress tests.
Monte dei Paschi confirmed early this morning that it had received letters from Passera and UBS containing proposals for the bank.
The proposal sponsored by UBS and backed by USA private equity funds envisaged a smaller 2.5-3.0 billion euro share issue and the partial voluntary conversion into equity of some of the bank’s subordinated bonds, one source said. It is thought that some involved in the deal are sceptical about it given that Monte dei Paschi has raised, and gone through, €8 billion in the last two years.
Shares in Monte dei Paschi, which have lost 99% of their value in the last decade, and more than 84% so far in 2016 have rallied on the news, and on Friday are enjoying their best day since May.
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Monte dei Paschi is seeking approval from the European Central Bank for a plan that will relaunch the troubled lender, which is suffering from poor profitability and is struggling to manage almost EUR50 billion in bad loans. A revision would have a negative impact on capital. The European Central bank recently asked the lender to offload more than 14 billion euros of gross non-performing loans over three years, 10 billion euros of which are not yet designated as impaired.
