Italy may approve a decree to help banks to boost capital through the sale of bonds to the government, as Banca Monte dei Paschi di Siena SpA prepares to raise at least 1 billion euros ($1.3 billion) using the securities, two people familiar with the matter said.
Ministers may pass the measure as soon as today at a Cabinet meeting in Rome, said the people, who asked not to be identified because the matter isn’t public yet. The legislation probably will be similar to the decree approved in 2009 that allowed lenders to issue so-called Tremonti-bonds, which were named after then Treasury Minister Giulio Tremonti, one of the people said.
Monte Paschi, which is among Italian lenders that must raise capital as part of Europe’s plan to end the sovereign-debt crisis, has a capital shortfall of 3.3 billion euros, according to the European Banking Authority. The bank must also repay 1.9 billion euros of state aid provided in 2009.
Monte Paschi was one of four lenders which got state aid under the previous law. Banco Popolare SC received 1.45 billion euros, Banca Popolare di Milano Scarl obtained 500 million euros and Banca Piccolo Credito Valtellinese Scarl got 200 million euros.
“The government measure is clearly done to help Monte Paschi,” said Angelo Drusiani, who manages about 3 billion euros at Banca Albertini Syz & C. in Milan. “I don’t think other banks need to apply for these securities to raise capital,” he said.
The bank fell 3.7 percent to 19.39 cents as of 12:05 p.m. in Milan, giving the bank a market value of 2.4 billion euros. The stock has dropped 23 percent this year, compared with a 3 percent decline of the Bloomberg Europe Banks and Financial Services Index.
Monte Paschi’s board meets today to approve a plan that includes capital measures to comply with the European Banking Authority’s targets. The Siena, Italy-based bank may sell at least 1 billion euros of bonds to the government as part of its plan, said a person yesterday. The bank may also restructure the old issue, said the person.
The lender has already covered more than 2 billion euros of its capital shortfall through the conversion of hybrid bonds and the implementation of new internal risk models, Chief Executive Officer Fabrizio Viola said last month.
Monte Paschi’s first-quarter profit dropped 61 percent to 54.5 million euros after setting aside more money for bad loans, it said May 15. Loan-loss provisions in the quarter rose 58 percent to 434 million euros.