Paschi Posts Its 10th Straight Loss on Provisions, Staff Cuts
2014-11-12 23:01:00.2 GMT
By Sonia Sirletti
Nov. 13 (Bloomberg) -- Banca Monte dei Paschi di Siena SpA, which is seeking to raise 2.5 billion euros ($3.1 billion) to plug a capital deficit that emerged in Europe’s bank health check, reported a 10th straight quarterly loss on higher bad- loan provisions and restructuring costs.
The third-quarter net loss widened to 796.7 million euros from 138.6 million euros a year earlier, Siena, Italy-based Monte Paschi said in a stock-exchange statement yesterday.
Results were affected by 318 million euros of one-time costs related to job cuts agreed with unions in August.
Chief Executive Officer Fabrizio Viola is seeking to turn around Italy’s third-biggest bank, engulfed in legal probes of alleged misconduct by former managers, by eliminating jobs and selling assets to return to profit by 2015. The bailed-out lender emerged with the biggest capital shortfall -- 2.1 billion euros -- among 25 banks that failed the European Central Bank’s tests of 130 lenders.
“Volume of impaired loans was affected by the reclassification of exposures during the credit-file review,”
Viola said on a call with analysts yesterday. Following the ECB’s assessment, Monte Paschi is reviewing “the methods and parameters applied in the classification and assessment of loans,” the CEO said.
Monte Paschi shares fell 6.5 percent yesterday to 63.5 cents before the results were released, valuing the bank at 3.3 billion euros.
Bad Loans
Monte Paschi’s bad-loan provisions rose to 1.26 billion euros in the quarter from 511 million euros a year earlier.
About 790 million euros of provisions that were incurred in the third quarter are related to loans reviewed by the ECB.
The bank moved about 700 million euros of loans from performing to non-performing in the first half and an additional
1.9 billion euros in the third quarter, Viola said.
“Low profitability, poor asset quality and funding issues remain the weak points of the equity story,” according to an Oct. 27 report by Manuela Meroni, a Milan-based analyst at Banca IMI, who has a hold recommendation on the stock.
The bank’s phased-in Tier 1 capital ratio, a key measure of financial strength, fell to 12.8 percent as of Sept. 30 from
13.5 percent at the end of June.
Capital Plan
Monte Paschi submitted its capital plan to fill the gap that emerged from the assessment to the central bank for approval this week, Viola said.
“The final amount of the capital increase included in the plan will depend on the execution of the other actions planned and on the decision by the authorities on the inclusion of the excess pre-provision profit expected for 2014,” Viola said. The final size of the sale will be decided next year, Chief Financial Officer Mingrone added.
Monte Paschi, which has already reimbursed 3 billion euros of state aid, said last week it will fully repay the aid next year after completing the share sale. In addition to selling new stock, the world’s oldest bank will dispose of non-core assets and investments valued at about 220 million euros to boost capital buffers. The bank also asked the ECB to reduce the shortfall by 390 million euros based on the lender’s “expected pre-provision profit” in 2014.
Monte Paschi has received binding offers for its consumer finance unit Consum.it, Mingrone said. The bank is still reviewing whether to sell the whole company or some of its assets, he said. Monte Paschi is also considering the disposal of bad-loan portfolios to improve its asset quality.