The bank is also working on assembling a consortium of banks to back a €5bn capital boost – a deal which Italy’s finance minister, Pier Carlo Padoan said the government was “greatly satisfied” with.
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The oldest operating bank in the world is the least prepared for a shock to the financial system, according to a European banking watchdog.
Monte dei Paschi will also raise up to €5 billion in fresh capital-or almost six times its market capitalization-to rebuild its capital cushion. Chief Executive Officer Fabrizio Viola, who took the top job in 2012, has struggled to restore the firm to profit after accounting irregularities and derivative bets by previous managers backfired. Instead, a healthy Monte dei Paschi could be an appetizing takeover target, analysts and bankers say. It will split them off into a separate entity and raise €5 billion ($5.6 billion) in new capital. The senior notes, up to 6 billion euros, may be backed by a state guarantee and sold on the market. Britain’s worst performing bank was Barclays.
Monte dei Paschi shares were recently up more than 8.10% in morning trading.
In addition, the bank said a group of Italian and worldwide banks were willing to underwrite its 5 billion-euro capital raising, adding that it expected to complete both the cash call and the bad-debt sale by the end of the year.
UBS (UBS) is reportedly in talks with beleaguered Italian bank Monte dei Paschi (BMDPY) to help finalize a private sector rescue plan before the results of the European bank stress tests are released tonight. Under European rules, this would entail politically unpalatable losses for Monte dei Paschi’s bondholders and depositors above 100,000 euros.
Three sources close to the matter said Monte dei Paschi was set to reject the proposal that was presented to the board by Passera in person.
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So far six banks in addition to the global coordinators JP Morgan and Mediobanca have given a preliminary commitment to underwriting the share sale, a source said on Friday.
