Monte Paschi to pay first dividend in 13 years as profit soars

By Valentina Za

MILAN (Reuters) -State-owned Italian bank Monte dei Paschi di Siena (MPS) on Wednesday said it would pay its first dividend in over a decade after posting in the fourth quarter alone the profit analysts had expected for the full year.

Like bigger peers Intesa Sanpaolo and UniCredit, Monte dei Paschi (MPS) has seen its profits turbocharged by higher interest rates.

However, the bank is also reaping the benefits of favourable rulings in a number of court cases against former management, while its restructuring under Chief Executive Luigi Lovaglio progresses.

The court verdicts allowed MPS to release 466 million euros in provisions against legal risks in the fourth quarter, contributing to a bumper 1.12 billion euro quarterly profit, after an annual 178 million euro loss in 2022.

Lovaglio told analysts litigation risks were normalising.

"Passion, and hard work, can be crucial to achieving targets ... I believe we have reached another milestone on the road to be a clear and simple bank," he said.

Two years ago the Rome government entrusted the Tuscan lender it bailed out in 2017 to Lovaglio, a veteran UniCredit banker.

Revenues, including net fees, strengthened in the fourth quarter compared to the previous one.

Lovaglio pleged to grow pre-tax profit this year, net of the release of risk provisions, and hiked the dividend payout ratio to 50% from 30%.

MPS, which is currently 39% owned by the state after the successful placement of a stake on the market in November, said it would pay out 315 million euros as dividends, two years ahead of schedule and for the first time since 2011.

Shares in MPS rose 4% by 1227 GMT to 3.506 euros each.

Taking into account the distribution plans, MPS said its core capital amounted to 18% of risk weighted assets, well above that of sector leaders UniCredit (16%) and Intesa Sanpaolo (13%).

Lovaglio ruled out using the excess cash to buy back shares like Italy's top two banks have done, and said MPS could seize opportunities in terms of partnerships instead, though it plans to keep the ratio above 18%.

In November Lovaglio had said net profit would top 1.1 billion euros in the full year. Analysts polled by the bank had looked for around 1.3 billion euros.

Net profit in 2023 instead came in at 2.05 billion euros, as higher interest rates drove up income from lending by nearly 50% and costs fell after MPS used the money from its latest capital raise to finance costly voluntary staff exits.

MPS also booked a positive 339 million euro tax effect in the three months through December.

($1 = 0.9296 euros)

(Reporting by Valentina Za, editing by Alessandro Parodi, Shri Navaratnam and Louise Heavens, Elaine Hardcastle)