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Monte Paschi CEO sees positive market feedback on $2.5 billion cash call

Giuseppe Fonte
·2-min read
FILE PHOTO: FILE PHOTO: A sign of the Monte dei Paschi bank is seen in Rome

By Giuseppe Fonte

ROME (Reuters) - Monte dei Paschi di Siena (MPS) Chief Executive Luigi Lovaglio said the initial feedback on the Italian bank's new strategic plan was generally positive, with the market perceiving its industrial goals as credible.

The state-owned bank is preparing to tap investors in the autumn to raise 2.5 billion euros ($2.5 billion) in fresh capital to fund a new strategy presented last month which aims to triple MPS' net profit in the next three years.

Speaking at a parliamentary hearing, Lovaglio said the cash call was expected to last around three weeks and it should end by Nov. 12 at the latest, although financial turmoil linked to Russia's invasion of Ukraine could have an impact on the timeframe.

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Italy owns 64% of MPS following a 2017 rescue that cost taxpayers 5.4 billion euros - a figure equivalent to around ten times the lender's current market value.

The Treasury now is preparing to pump in another 1.6 billion euros based on the size of its stake.

"We started the roadshow with investors on the business plan and the first feedback is positive. There is a queue of banks that want to support us," Lovaglio, who took the job at MPS only in February, told lawmakers.

"I'm very confident," the former UniCredit executive added, referring to the share sale.

CONSOLIDATION ON THE HORIZON

The Siena-based lender has raised 25 billion euros from investors since a ruinous acquisition it agreed in 2007 just before the global financial crisis.

The latest call could also be made more complicated by simmering tensions in Italy's broad coalition government ahead of an election due in early 2023.

Under his plan, Lovaglio said the bank would lay off some 3,500 staff on a voluntary basis by the end of 2022, with a one-off charge of 800 million euros.

He added that Italy was close to finalising talks with the European Union antitrust authorities over a new re-privatisation deadline and new restructuring targets for MPS.

The collapse of talks with UniCredit over its potential purchase of MPS last year forced the Treasury to seek an extension of the initial end-2021 deadline to sell the bank.

Lovaglio said he believed there would be a "great consolidation" process in the Italian banking system, adding he was working so as to discuss merger deals "with equal standing" to any potential suitor.

($1 = 0.9979 euros)

(Editing by Keith Weir)