Monte dei Paschi appeals to more banks for cash appeal and fights legal challenge

The logo of Monte dei Paschi di Siena bank is seen at the entrance of a bank in Rome, Italy August 16, 2018. REUTERS/Max Rossi/File Photo

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  • Barclays, Santander, SocGen and Stifel join the consortium
  • Sets aside more money after 1.8 billion euros in new claims
  • Says new unsubstantiated allegations
  • Accepts 900 million euro assignment to reduce bad debts

MILAN, Aug 5 (Reuters) – Italy’s state-owned bank Monte dei Paschi di Siena (MPS) (BMPS.MI) said four other banks had agreed to back its next 2.5 billion euro cash call (2 $.6 billion), as it moves on to fend off another legal challenge.

The Tuscan bank needs more cash five years after an €8bn bailout that gave the state a 64% stake.

Burdened with a mountain of legal risk after decades of mismanagement, MPS was on the verge of drawing a line under its legal woes after an Italian appeals court in May acquitted all defendants in a major derivatives case. , bodes well for other pending lawsuits that could flow claims. Read more

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A year ago, MPS had also reached a historic agreement with its former reference shareholder which freed it from some 4 billion euros in extrajudicial claims.

However, the bank said on Friday it had received new legal claims worth 1.8 billion euros between June and August from a consultancy firm, over allegedly incorrect financial information from the bank, resulting in 78 million euros of provisions for legal risks in the first half. .

The advice, which someone familiar with the matter identified as Martingale risk, acts for various institutional investors. Martingale Risk, whose services include supporting investors seeking to recoup their losses, did not respond to requests for comment from Reuters.

Showing his first earnings as chief executive, veteran banker Luigi Lovaglio told analysts the latest claims were not sufficiently backed up by documents and that MPS legal advisers doubted they warranted any retainers, but he had decided to save some money anyway.

MPS said Barclays, Santander, Societe Generale and Stifel joined BofA, Citi, Credit Suisse and Mediobanca in signing a preliminary agreement to collect all unsold shares on the cash call.

The deal comes amid recession fears and political instability in Italy, which have heightened risks for underwriters. MPS’s market value of just 440 million euros limits the potential discount on the new shares and makes them expensive relative to their peers, analysts say. Read more

Underwriters at Italian energy company Saipem (SPMI.MI) ended last month with 30% of a €2 billion share issue on their books. Read more


Goldman Sachs analyst Jakub Lichwa told the MPS call that the consortium’s expansion was “obviously positive” news for the bank, but raised questions about the strength of the commitment.

“I’m a bit surprised that a lot of banks are joining the exercise in the context of the operating environment,” Lichwa said.

MPS had said in June that the signing of the initial subscription agreement was subject to a number of standard conditions, including positive feedback from investors.

Chief Financial Officer Andrea Maffezzoni said nothing has changed since then.

“Despite the rather difficult environment, I am confident (in the success of the fundraising),” Lovaglio said, ruling out the state increasing its stake by covering more than 64% of the rights issue.

MPS must place 900 million euros with private investors to avoid breaking EU state aid laws.

Despite new legal risk provisions, MPS posted a net profit of €17.5 million ($18 million) in the second quarter after loan write-downs needed to facilitate divestitures, compared to €9.7 million in the second quarter. first trimester.

Improved lending spreads more than offset lower net fees in challenging markets and a much lower contribution from trading revenue.

MPS said it had agreed to sell bad loans worth 900 million euros, which allowed it to reduce the share of problem debt in total loans to 3.9%.

The reduction in bad debts is among new restructuring commitments that Italy agreed this week with the European Commission when it secured an extension to the original end-2021 deadline to reprivatize MPS.

The Tuscan bank said it expected the European Central Bank to approve its proposed capital increase in time for a shareholder vote on the share sale on September 15.

($1 = 0.9777 euros)

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Reporting by Valentina Za; Editing by Christina Fincher and David Holmes

Our standards: The Thomson Reuters Trust Principles.

Ruth R. Culp