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Monte Paschi Posts Eighth Straight Loss on Bailout Costs

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Monte Paschi CEO Fabrizio Viola
Fabrizio Viola, chief executive officer of Banca Monte dei Paschi di Siena SpA. Photographer: Marc Hill/Bloomberg

May 13 (Bloomberg) -- Banca Monte dei Paschi di Siena SpA, the bailed out Italian bank seeking to raise 5 billion euros ($6.9 billion) in a share sale, reported an eighth straight quarterly loss on costs tied to state aid.

The first-quarter net loss widened to 174 million euros from 101 million euros a year earlier, Siena-based Monte Paschi said in a stock-exchange statement yesterday. Results were hurt by interest payments on the aid and 143 million euros of additional charges to the Italian Treasury.

Monte Paschi’s shares fell as much as 2.6 percent in Milan trading and were down 1 percent at 23.89 euros by 9:40 a.m., valuing the company at 2.79 billion euros.

The quarterly loss “is misleading given a huge net interest income one off related to the reimbursement of the Monti bonds,” Fabrizio Bernardi, an analyst at Fidentiis Equities in Milan, wrote in an e-mailed note to clients. Still, “high loan loss provisions forced the net operating income in any case in the red.”

Chief Executive Officer Fabrizio Viola is seeking to turn around Italy’s third-largest bank, engulfed in legal probes of alleged misconduct by former managers, by cutting jobs and selling assets to return to profit by 2015. The bank is close to a sale of bad loans as it seeks to curb risk.

“We are finalizing the sale of 500 million euros of non-performing loans,” Viola, 56, said on a conference call. “The transaction is expected to be completed in the first half of the year.”

State Aid

Monte Paschi is asking investors for more funds after agreeing to partly repay 4.1 billion euros in state aid this year. The annual interest on bonds it sold to the government in the bailout increased to 9.5 percent in 2014 from 9 percent last year. The bank must swap the debt for stock if it doesn’t have the cash for the payment.

Loans to customers dropped 5.6 percent in the first quarter from a year earlier to 132.7 billion euros, while risk weighted assets declined to 81.1 billion euros. Loan-loss provisions fell to 477 million euros from 484 million euros a year earlier. Operating costs slid 9.4 percent to 661 million euros.

The lender, one of 15 Italian banks whose assets are under review by the European Central Bank, is strengthening its capital and liquidity positions, Viola said.

LTRO Repayments

Monte Paschi, one of the 10 biggest users of the ECB’s longer-term refinancing operations, said it paid back an additional 4 billion euros of the 29 billion euros it borrowed in the LTRO, bringing repayments to date to 5 billion euros.

“The bank regained the ability to access capital markets, starting the LTRO reimbursement,” Viola said.

Monte Paschi plans to gradually pay back the LTRO, reimbursing 4 billion euros by June, an additional 6 billion euros by December and the rest by February, said Chief Financial Officer Bernardo Mingrone.

The bank will have a sizable capital buffer to cushion any negative impact from the ECB’s asset review and stress tests, Mingrone said.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Francesca Cinelli in Milan at fcinelli@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Dan Liefgreen, Mark Bentley, Steve Bailey

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