Monte Paschi Not in Talks to Restructure Deals, CEO Viola Says

Banca Monte dei Paschi di Siena SpA isn’t in talks to renegotiate derivative deals, dubbed Santorini and Alexandria, which contributed to a 730 million-euro ($975 million) hit to its assets.

“We are not in talks with the counter-parties to restructure Alexandria and Santorini,” Chief Executive Officer Fabrizio Viola told reporters in Bergamo, Italy today. “So far we haven’t taken any decision; we will evaluate what to do.”

Viola and Chairman Alessandro Profumo are seeking to revive profitability and restore investors’ confidence amid allegations former management hid losses related to three derivative transactions, labeled Alexandria, Santorini and Nota Italia. The lender said Feb. 7 that the impact of Santorini will be 305.2 million euros, while Alexandria will bring losses of 272.5 million euros and Nota Italia of 151.7 million euros.

Monte Paschi has declined 17 percent in Milan trading since Bloomberg News first published details of the Santorini transaction on Jan. 17.

Monte Paschi has restructured only the Nota Italia deal so far, removing risk related to Italian government bonds. The bank paid 139 million euros to restructure the transaction on Jan. 23.

As for Santorini and Alexandria, “the cost of closing would probably be prohibitive for the bank,” said Alessandro Frigerio, a fund manager at RMJ Sgr in Milan. “Considering that those transactions are under probe, Monte Paschi may have some incentive to wait for the results of the investigation so it may have more bargaining power.”

Siena prosecutors are probing the bank to see whether crimes were committed by former executives related to market manipulation, false accounting, obstruction of regulatory activity related to the acquisition of Banca Antonveneta SpA and fraud tied to derivatives trades, people familiar with the situation have said.

Profumo reiterated today that he rules out the existence of any more transactions that disguise previous losses.

Before it's here, it's on the Bloomberg Terminal.