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Watchdogs eye MPS after capital hike put off

Bank future may hinge on planned 3-bn-euro rights issue

30 December, 18:57
Watchdogs eye MPS after capital hike put off (By Alina Trabattoni).

(ANSA) - Rome, December 30 - Italian regulators on Monday launched what they termed "coordinated monitoring" of Monte dei Paschi di Siena (MPS) following weekend developments which saw the troubled Italian bank delay a crucial three-billion-euro share sale until May.

The bank's shares plunged almost 6% as the bourse opened the week Monday amid the news the oversight authorities from the Bank of Italy and stock market watchdog Consob are to carefully monitor developments, just a percentage point shy of the limit before trading is frozen. The stock later rebounded, gaining over 1% in the day's trading. The bank has suffered a series of losses related to derivatives and has seen earnings eroded by years of economic recession. The planned rights issue was tied to paying back part of the 4.1 billion euros in state aid it has been awarded by the Italian government as part of a plan to turn the lender around. Investors are taking stock of the uncertainty surrounding the turnaround plan for MPS, Italy's third-largest and the world's oldest, after management's desire to complete the cash call in January was stalled by shareholders until mid-May. Analysts say the bank may risk nationalization if it fails to generate enough capital to repay State aid.

Chairman Alessandro Profumo, who together with Chief Executive Officer Fabrizio Viola had been pushing for the cash call launch next month in January 2014 and had been asking shareholders to approve the plan has been reported by local media to be mulling a resignation if the rights issue is prevented from taking place. Even so, MPS's largest shareholder, a not-for-profit local Tuscan foundation, is reported to be attempted to stall the cash call until mid-2014 amid plans to sell its 33.5% stake in the bank.

The value of shares in the scandal-ridden bank hit a record low of just over 15 euro cents on December 18, a day after Profumo warned it must recapitalize or face nationalization.

The recapitalization plan was recently approved by the European Union.

MPS already had to recapitalize in 2012, when it lost over two billion euros in the first half of the year in the wake of rising yields and declining valuations on Italian government debt.

It did so again in January 2013, when news went public that top management had entered into secret derivatives contracts with Deutsche Bank and Nomura to cover estimated losses of 500 million euros to 750 million euros in two of its divisions.

The firm sparked fresh controversy this year when it was accused of misleading Italy's market regulator in October 2012, shortly before it received a 4.1-billion-euro State bailout.

MPS is already at the center of a judicial investigation into its acquisition of smaller rival Antonveneta in 2008, allegedly at a suspiciously low price, as well as the derivatives trades the bank allegedly used to conceal losses.

Former Chairman Giuseppe Mussari and former director general Antonio Vigni, who left in early 2012, are both under investigation for market manipulation, making false statements to the market and regulatory obstruction in relation to the Antonveneta deal and the derivatives trades.

Both deny any wrongdoing.

MPS was founded in 1472 by the magistrate of the city state of Siena, then one of the richest financial centres in Europe along with other Tuscan and Lombard hubs.