Monte Paschi Posts Third Straight Quarterly Loss on Bad Loans

Banca Monte dei Paschi di Siena SpA, Italy’s third biggest bank, reported a third straight quarterly loss, missing analysts estimates, on soaring bad-loan provisions and lower income from lending.

The net loss of 1.59 billion euros ($2 billion) in the fourth quarter compared with a loss of 5 billion euros a year earlier, when the bank wrote down goodwill related to acquisitions, the Siena-based lender said in a statement today. That missed the 686.3 million-euro loss estimated by 11 analysts surveyed by Bloomberg.

Monte Paschi, engulfed by investigations of its former managers, is selling assets, cutting costs and reducing risks to return to profit. Chief Executive Officer Fabrizio Viola and Chairman Alessandro Profumo, appointed last year to turn around the 541-year-old bank, are trying to regain confidence of investors after the lender was forced to seek a second state rescue in four years and to take a 730 million-euro hit linked to derivative contracts.

“The bank will likely need more help going forward, as its bad loans continue to rise, and its operating profits struggle,” said Alberto Gallo, head of European credit research at Royal Bank of Scotland Group Plc. Bad loans as a proportion of total lending may rise 1 percentage point to 2 percentage points a quarter, for “at least” another four quarters, he said.

Photographer: Alessia Pierdomenico/Bloomberg

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Photographer: Alessia Pierdomenico/Bloomberg

Banca Monte dei Paschi di Siena, engulfed by investigations of its former managers, is selling assets, cutting costs and reducing risks to return to profit.

Loan-loss provisions increased to 1.37 billion euros in the quarter from 464 million euros a year earlier. Revenue declined 37 percent to 778.3 million euros, hurt by a net interest income drop of 52 percent to 434.5 million euros.

The new management said in June it would strengthen finances by selling its leasing and consumer credit units, closing 400 branches and eliminating 4,600 jobs by 2015. The revised plan has to be submitted to the European Banking Authority (BMPS) by June.

Regulators and prosecutors are scrutinizing derivative deals dubbed Alexandria, Santorini and Nota Italia that obscured losses under former management. Bloomberg News first reported on Santorini on Jan. 17.

Prosecutors are also probing former executives for alleged market manipulation, false accounting and obstruction of regulatory activity during the 2007 takeover of Banca Antonveneta SpA, people with knowledge of the matter have said.

Monte Paschi was unchanged at 18.5 cents in Milan trading before earnings were released. Shares almost halved in the last 12 months, giving the bank a market value of 2.16 billion euros.

To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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