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Monte Paschi Posts Sixth Straight Quarterly Loss on Bailout Cost

Banca Monte dei Paschi di Siena, the Italian bank seeking Europe’s approval for a 4.1 billion-euro ($5.5 billion) bailout, reported a sixth straight quarterly loss on state aid costs and provisions for bad loans.

The third-quarter net loss widened to 138.3 million euros from 25.9 million euros a year earlier, Siena-based Monte Paschi said in an e-mailed statement today. That was less than the average estimate for a 162.1 million-euro loss among seven analysts surveyed by Bloomberg.

Chief Executive Officer Fabrizio Viola has pledged to cut an extra 3,360 jobs and increase capital by 2.5 billion euros as he waits for regulators to sign off on his latest restructuring plan. The European Commission will make a decision by the end of this month, two weeks later than planned, a person familiar with the matter said this week.

“The focus of investors remains on the execution of the capital increase, a key step to avoid nationalization,” Vincenzo Longo, a Milan-based strategist at IG Markets, said by telephone. “We also expect the approval of the plan and the full disclosure of its details.”

Third quarter revenue fell 26 percent to 1.04 billion euros from a year earlier, hurt by lower income from lending and the nine percent pro-rata interest paid on state aid. Net interest income fell 30 percent to 506.6 million euros.

Loan-loss Provisions

Monte Paschi is among lenders in the country suffering from Italy’s longest recession in more than 20 years. Stricter rules by local and international regulators are also forcing banks to set aside more money for non-performing loans before a European Central Bank review of lenders’ balance sheets.

Loan-loss provisions grew to 511 million euros from 461 million euros in the third quarter of 2012. Monte Paschi decreased its bad-loan coverage ratio by 30 basis points to 40.8 percent in the third quarter from the previous three months.

The company’s shares rose 2.1 percent to 22.45 cents in Milan today, giving the bank a market value of 2.62 billion euros and paring declines this year to 0.5 percent. The earnings were published after the market closed. The 40-company Bloomberg Europe 500 Banks and Financial Services Index climbed 16 percent since December.

Prosecutors are probing whether former managers at Monte Paschi, which piled up losses of about 8 billion euros in the past two years, used derivative contracts to obscure more than 700 million euros of losses.

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