|Bid||0.0000 x 0|
|Ask||0.0000 x 0|
|Day's Range||1.0000 - 1.0000|
|52 Week Range||0.4920 - 1.2700|
|Beta (5Y Monthly)||1.51|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|Ex-Dividend Date||Jul 22, 2014|
|1y Target Est||N/A|
(Bloomberg) -- Italian taxpayers may need to inject more than Banca Monte dei Paschi di Siena SpA’s entire market value into the troubled bank as its leadership and the Finance Ministry consider a capital increase of about 1.5 billion euros ($1.8 billion).Officials at the ministry and Monte Paschi Chief Executive Officer Guido Bastianini discussed the recapitalization as they reviewed options to boost the bank’s stretched capital, according to people familiar with the discussion, who asked not to be named as the matter is private.Monte Paschi received more than 9 billion euros from the state since 2009, with two bailouts before it was nationalized. While half that amount has been paid back, the remainder is represented by the government’s 68% stake in the bank, which has a market value of 900 million euros.The rising pressure on capital may further complicate the Italian state’s plan to dispose of its holdings by the end of next year. UniCredit SpA executives have held informal contacts with the government over a possible combination, Bloomberg reported last month.The talks with the Finance Ministry are at an early stage and the review may result in a decision against a capital injection. A spokesman for Monte dei Paschi declined to comment. A representative for the Italian Treasury didn’t have an immediate comment.Monte Paschi’s 544-Year Journey From the Renaissance to RescueThe bank, brought down by soured debt and losses on derivatives bets made by previous management, has struggled to restore profitability since its rescue. Now its capital is under pressure from costs related to a multi-billion-euro bad-loan disposal and increasing legal risks after its former chairman and CEO were convicted of false accounting and market manipulation.Monte Paschi fell as much as 3.6% in Milan trading and was down 0.9% as of 10:16 a.m. The stock has declined by about 28% this year reducing its market value to 1.2 billion euros.Monte Paschi’s directors on Thursday discussed the option of setting aside as much as 500 million euros to prepare for the potential legal peril, people with knowledge of the matter said. Monte Paschi said officials decided to reclassify some of its potential legal disputes from “possible” to “likely” after the court ruling. It didn’t disclose any talks about provisions.The bank may need 1.2 billion euros to 1.8 billion euros of equity, and the Finance Ministry may tap the 1.5 billion euros set aside in August to back state-controlled companies, the people said. The amount could be much lower, depending on the bank’s provisioning needs, another person said.“Any change to government exposure to MPS would need to be discussed with European authorities,” Citigroup analyst Azzurra Guelfi said in a note on Friday. “MPS is often at the center of investors’ questions on the future of M&A in Italy, but we expect this to be a complex matter, given for example the litigation pending as well as the group’s profitability and capital.”Civil and criminal cases related to Monte dei Paschi’s former management have dogged the lender since it was bailed out by the state in 2017. In August, the bank said risks linked to disputes and legal cases rose to about 10 billion euros, for which it had set aside only a small portion of funds.What Bloomberg Intelligence Says“Monte Paschi’s recapitalization is inevitable, we believe, with the convictions of ex-Chairman Alessandro Profumo and ex-CEO Fabrizio Viola increasing the likelihood that more of the disclosed legal risk of 10 billion euros is realized. We calculate the bank could need 2 billion euros of capital to bring the CET1 ratio to 12.5%.”\-- Georgi Gunchev, BI banking analystClick here to read the full storyMonte Paschi Capital Injection Looms as Legal Risk Rises: ReactThe world’s oldest bank has already planned the sale of bonds to meet capital requirements after the transfer of about 8 billion euros of soured debt to state-owned firm Amco reduced its key common equity tier 1 ratio below 10%. In August, the European Central Bank gave the green light to the deal conditional on the sale of securities to restore capital buffers.While years of restructuring lowered costs and reduced its bad loan pile, the bank’s struggles with low profitability and a slumping share price have become worse since the Covid-19 crisis started. Low capital buffers may make it harder to realize the Italian state’s plan to dispose of its 68% stake in Monte dei Paschi by the end of next year.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Another year, another conviction for yet another set of former managers of the world’s oldest bank. From afar, the Byzantine tale of Banca Monte dei Paschi di Siena SpA’s repeated failings — shameful as they are — might look like the company’s problem alone. But that isn’t the case.It’s bad enough that the executives who ran Paschi for years, and those brought in subsequently to clean it up, have been so embroiled by scandal. Equally troubling is that regulators, the courts and Italy’s government missed multiple chances to set the lender straight.Consider the latest case. On Thursday, Paschi’s former chairman Alessandro Profumo and ex-Chief Executive Officer Fabrizio Viola were convicted for false accounting and market manipulation. The two executives carried out “ambiguous and incomplete” accounting between 2012 and the first half of 2015, according to the indictment. Profumo, currently CEO of Italy’s state-owned aerospace conglomerate Leonardo SpA, and Viola were each ordered to serve jail sentences of six years. Their lawyer said they plan to appeal.The previous management team at Paschi was convicted in November 2019 for hiding the bank’s losses through a complicated derivatives trade dating back to 2008. Profumo and Viola have now been accused of misrepresenting what they found when they took over in 2012 and of continuing to make the bank appear safer than it was.Instead of representing the transactions they discovered as credit default swaps, a form of derivative, the two men booked them as government bond holdings, the court said. As a result, Monte Paschi continued to mask the fact that it probably had an enormous trading position — a hugely risky proposition.It’s not just the executives at question here, though. What has emerged since a colleague and I first revealed the hidden transactions in January 2013 is how far regulators and politicians were aware of the problems and yet continued to support Paschi with multiple taxpayer rescues.The Bank of Italy spotted accounting irregularities at Paschi as early as 2010, when former European Central Bank president Mario Draghi was its governor. Profumo’s and Viola’s accounting after they took charge had been questioned publicly since 2013.As recently as 2016, Paschi was probably insolvent, suffocating under a pile of bad loans. Yet that didn’t stop the ECB in 2017 giving its blessing to the lender’s third round of state aid in less than a decade. Italy has handed 8 billion euros ($9.4 billion) to Paschi, and its current market value is 1.4 billion euros.The latest trial also raises questions about the credibility of Italy's courts. Judges had to force the same prosecutors who won the convictions last year to take Profumo and Viola to court.For Monte Paschi, facing legal claims on the order of 10 billion euros, the verdict on Thursday could force it to set aside more funds which could further erode capital. Should it need to bolster its reserves, the cost could be extortionate, wiping out the meager profit it’s expected to earn next year.Italy and the European authorities will no doubt claim their priority was the need to maintain financial stability during the depths of the euro zone’s sovereign debt crises. But the cost of the Paschi fiasco is a loss of confidence in the governance of Italy’s and Europe’s banking industry.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- After a decade of scandals and multiple bailouts, Banca Monte dei Paschi di Siena SpA is back in the spotlight. This time, the Italian government is shopping around the 1.5 billion-euro ($1.7 billion) lender ahead of a European Union deadline for Rome to exit the bank next year.Loaded with legal risks that dwarf its market value, any investor will be loathe to buy Monte Paschi with those liabilities — not least in the midst of a pandemic.The risk to Italian taxpayers is that Rome offloads its majority stake in the world’s oldest bank at any cost. A sale to UniCredit SpA, as is being discussed, might solve Italy’s immediate problem of meeting the EU deadline, but the bigger bank would demand strong financial guarantees. A Paschi merger would also make it harder for UniCredit to pursue more compelling deals.It’s no surprise that Italy has restarted talks with UniCredit to sound it out on Monte Paschi. Foreign banks haven’t shown much interest and Intesa Sanpaolo SpA, UniCredit’s main rival, is busy buying UBI, another lender that might have made a good merger partner for Paschi.Equally predictable is that UniCredit is pushing back. The company wants the government to cover any capital shortfall from a potential merger and the legal costs, according to press reports. History isn’t on Rome’s side. In 2017, the state funded Intesa’s purchase of two failing lenders.Why would UniCredit accept anything less this time? Chief Executive Officer Jean Pierre Mustier has focused on returning capital to shareholders after cleaning up his own bank. Strategically, taking over another mid-tier Italian lender, Banco BPM SpA, makes more sense. A BPM deal would reinforce UniCredit’s position in Lombardy, the economic engine of Italy.A merger in Germany, UniCredit’s second-biggest market, would be even more compelling. While cross-border deals remain difficult in Europe, if Germany’s Commerzbank AG were to come up for sale, UniCredit would be better off pursuing that purchase.The reason Mustier is being pressured over Paschi is that other avenues for the ailing lender are much less appealing. A combination with Popolare di Bari, which Italy is in the process of rescuing, wouldn’t return Monte Paschi to private hands.Adding to Rome’s urgency, Monte Paschi is close to selling 8 billion euros of bad loans to another state-owned entity later this year, a key milestone in its rehabilitation. The sale will erode Paschi’s capital, which the European Central Bank wants the lender to strengthen. A merger with a stronger bank would solve that problem.A greater risk is that Monte Paschi loses some of the 10 billion euros of legal claims against it, forcing it to set aside more funds and further eroding capital. The pandemic could also lead to a fresh avalanche of bad loans. Should it need to raise more capital, even with the backing of the state, the costs would be prohibitive and eat into already weak profitability. Analysts expect the bank to make just 76 million euros next year, which could be wiped out by higher interest costs.It’s arguable that Monte Paschi should have been wound down years ago — it was probably insolvent at the time of its last state rescue — but more visibility on the potential legal liabilities would at least strengthen Italy’s negotiating hand. While a return to private ownership could help salvage what’s left of the storied lender, Rome must do everything possible to keep a lid on the taxpayers costs.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.