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Former Monte Paschi executives acquitted over derivatives case

Italy appeals court acquits former Monte Paschi execs in derivatives trial

By Emilio Parodi

MILAN (Reuters) -An Italian appeals court on Monday acquitted three former top executives of Banca Monte dei Paschi di Siena in one strand of a long-running derivatives case, boosting the earnings prospects of the state-owned lender.

The court ruling, which overturns an earlier conviction, reduces the legal risks facing bailed-out Monte dei Paschi (MPS), in which the state still has a 39% holding after selling a 25% stake last month for 920 million euros ($989 million).

The Italian state must eventually exit MPS's capital in full in order to comply with European Union rules on state aid.

The acquittal of the executives frees MPS from obligations towards plaintiffs seeking damages in connection to derivatives deals which are widely blamed for playing a part in the bank's troubles.

MPS set aside money against such legal risks, provisions which it can now release. The bank has not disclosed their overall value, but said last month it faced some 5 billion euros in legal claims as of Sept. 30.

Shares in the bank closed up 3%, outperforming a flat Italian banking index.

Milan's appeals judges acquitted former MPS Chairman Alessandro Profumo and former Chief Executive Fabrizio Viola, as well as the former head of statutory auditors Carlo Salvadori, saying there was no case to answer.

"I never lost my trust in the judicial system, I'm happy for the bank," said Profumo, a veteran Italian executive previously at the helm of both UniCredit and Leonardo.

Losses on the derivatives deals, together with those MPS suffered during the euro zone debt crisis, have threatened to destabilise Italy's financial industry and triggered the Tuscan lender's 8 billion euro ($8.6 billion) bailout in 2017.

Profumo and Viola had each been handed a six-year jail sentence by a lower court for allegedly incorrectly booking the two derivative deals between 2012 and 2015.

Salvadori had received a three-and-a-half year sentence.

The main trial on these same deals related to their booking in MPS' accounts between 2009 and 2011.

That case ended on Oct. 11 when Italy's highest court acquitted all 15 defendants, as well as Deutsche Bank and Nomura which had arranged the transactions in 2009.

The deals were alleged to have helped MPS hide losses racked up after the ill-advised acquisition of a smaller rival in 2008, on the eve of the global financial crisis.

"The verdict ends a sad story that has dragged on for 10 years," Viola said in a statement.

"The bitterness of the initial conviction ... will accompany me for the rest of my life ... I'm happy for the bank, which can benefit from this decision to complete its turnaround."

MPS is targeting a 2023 profit above 1.1 billion euros as CEO Luigi Lovaglio presses on with a restructuring that has seen some 4,000 staff take early retirement. Unions on Monday said its performance should lead to new hires, as previously agreed.

In 2018, Milan prosecutors had asked for the Viola-Profumo case to be dropped, saying they followed accounting guidelines from regulators in booking the deals, but a judge rejected the request and sent them to trial.

($1 = 0.9296 euros)

(Reporting by Emilio Parodi; Editing by Valentina Za, Jane Merriman and Alexander Smith)