Monte Paschi foundation discussing stake sale with government - sources

Reuters
Monte Dei Paschi bank headquarters is pictured in Siena
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Monte Dei Paschi bank headquarters is pictured in Siena January 25, 2013. REUTERS/Stefano Rellandini

By Stefano Bernabei and Silvia Ognibene

ROME (Reuters) - The foundation that is the largest shareholder in Banca Monte dei Paschi di Siena (MIL:BMPS) is in discussions with the Italian treasury about selling part of its stake, two sources close to the matter said.

The Monte dei Paschi foundation, a not-for-profit entity with close ties to local politicians, needs to pay back debts of 350 million euros (294 million pounds) - which at current market prices would force it to sell a 12.5 percent stake in the bank.

It currently has a 33.5 percent holding and is under pressure to complete the sale quickly because the bank needs to carry out a 2.5 billion euros capital increase by end-2014 to meet EU conditions for approving a state bailout.

The head of the foundation met officials from the Italian treasury on Wednesday to discuss how to best carry out the sale, said the sources, who spoke on condition of anonymity.

The foundation and the treasury declined to comment.

The treasury has supervisory powers over Italy's banking foundations, which are core shareholders in many of the country's lenders.

The Monte dei Paschi foundation has already said it will not subscribe to Banca Monte dei Paschi's rights issue and is keen to sell its stake before the cash call takes place given that it could weigh on the bank's share price.

Monte dei Paschi's shares gained 1.8 percent to 0.24 euros by 1030 GMT, with traders citing news of the talks to sell the stake and also a report in La Repubblica daily saying two Middle eastern funds could be interested in buying an 8 percent stake from the foundation.

However one of the sources said the foundation's disposal process was at preliminary stage and both the timeframe and amount of the stake to be sold had yet to be decided.

Until early 2012 the foundation had a 49 percent in the bank but it has been cutting it down to pay back creditors. After repeated writedowns due to the bank's financial woes, the foundation's remaining stake has a book value of 0.24 euros per share - matching the current share price.

Analysts say the foundation could struggle to find buyers for its stake, since anyone buying now would have to put in more money to keep its stake intact when the capital increase takes place.

Also, shares issued in the cash call would likely be priced at a discount, so buying a stake would probably be cheaper then.

Monte dei Paschi received a 4.1 billion euro state bailout earlier this year and faces the prospect of nationalisation if it cannot pull off the capital increase - which roughly equals its market capitalisation.

The lender is at the centre of a judicial investigation over its costly acquisition of a smaller rival in 2007 and loss-making derivatives trades it carried out in the deal's aftermath.

(writing by Silvia Aloisi; Editing by Elaine Hardcastle)

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