Monte Paschi Successful Rights Offering Signals Turning Point

Banca Monte dei Paschi di Siena SpA’s successful 5 billion-euro ($6.8 billion) rights offering will enable Italy’s third-largest bank to boost capital, repay state aid, and help reach its goal of returning to profit next year.

“This is an important step in Paschi’s turnaround process,” said Massimo Intropido, head of Milan-based financial research firm Ricerca Finanza. “The success of the sale will give the bank a lifeline to build up a capital buffer before the ECB’s assessment results.”

Chief Executive Officer Fabrizio Viola is seeking to turn around bailed-out Monte Paschi by cutting jobs and selling assets under a plan to return to profit by 2015. The world’s oldest bank will use the money raised in the share sale to repay more than 70 percent of 4.1 billion euros of state aid and strengthen its balance sheet to cover any capital shortfalls identified by the European Central Bank, which is reviewing the assets of euro-area banks to see if they are properly valued.

Shareholders committed to 99.85 percent of the rights offering. The bank secured pledges to buy 4.99 billion new shares, Monte Paschi said yesterday in a statement filed with the Milan stock exchange. The rights offer is fully underwritten by a group of 23 banks led by UBS AG, which will seek buyers for the rest of the shares from July 1 to July 7.

“The great success of the capital increase allows us to look to the future with renewed energy,” Viola said in the statement. “A positive result for MPS and for the State.”

Monte Paschi fell 1.7 percent in Milan to 1.47 euros, giving the company a market value of about 7.5 billion euros.

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