BANCA MONTE dei Paschi di Siena SpA plans to raise 2.5 billion euros ($ 2.8 billion) to cover capital needs after the Italian government’s failed efforts to sell the lender to UniCredit SpA.
The capital increase is part of a five-year business plan that will be submitted to European authorities for approval, he said in a statement Friday evening. The new funds will allow the bank to cover a gap that appeared during the stress tests, investments of 800 million euros and restructuring charges of 1 billion euros.
Monte Paschi is revising a plan submitted to regulators earlier this year as the Italian government fails to comply with a European Union (EU) requirement to withdraw from its participation. Italy bailed out Paschi, the world’s oldest bank, in 2017 and, under bailout conditions, is expected to quit the lender by year-end, though officials have said they are asking for a extension.
Finance Minister Daniele Franco said Italy has already had initial talks with the EU to extend the deadline. Italy now expects to need at least another year to find a new buyer, people with knowledge of the matter have said.
The measures announced on Friday are part of a 2022-2026 strategic plan, which also provides for job cuts managed through a voluntary exit system. Friday’s proposal will be the starting point for discussions with the European Commission, which oversees the application of rules on state aid to businesses.
Monte Paschi has been a financial burden on the Italian government since it was first bailed out in 2009, plagued by worsening loans and derivatives deals that backfired. It has struggled to generate consistent profits, given the limited room for maneuver under the terms set by the EU in return for support for the aid plan.
Talks over the sale of Monte Paschi to UniCredit were halted earlier this year over the question of how much capital Italy should inject into the lender. – Bloomberg