Paschi Restates Accounts After Consob Reviewed Nomura Deal

  • Review may have negative fiscal impact of 130 million euros
  • Shares rise in Milan after hitting record low on Dec. 14

Banca Monte dei Paschi di Siena SpA will restate its financial accounts to comply with a request from Italy’s market watchdog that the lender amend how it booked a transaction with Nomura Holdings Inc.

Consob requested the bank change its 2014 and first-half accounts to reflect that the deal dubbed Alexandria should be treated as a credit-default swap instead of a repurchase agreement, Paschi said in a statement late on Wednesday. Milan prosecutors found new information this year as they probed the transaction, which the former management had used to hide losses, the bank said, citing Consob’s assessment.

The restatement should have a positive impact of 714 million euros ($780 million) before taxes on 2015 results, while it will be neutral on capital. The new treatment may lead to a negative fiscal impact of about 130 million euros, Monte Paschi said.

Monte Paschi, bailed out twice since 2009, has been engulfed by legal probes into former managers who had masked losses with the Nomura transaction and a similar deal with Deutsche Bank AG. After tapping investors for funds to replenish capital, the lender is now seeking a buyer to help restore profit as bad loans mount.

"The restatement puts an end to a long dispute that has weighed on stock for years,” said Fabrizio Bernardi, a Milan-based analyst at Fidentiis Equities. "The possible fiscal impact on capital is minimal and manageable," he said.

Capital Hit

Monte Paschi rose as much as 2.2 percent in Milan trading and was up 1.6 percent at 1.22 euros as of 12 p.m., giving the bank a market value of 3.6 billion euros. The shares closed at a record low of 1.15 euros on Dec. 14.

Mediobanca’s analysts estimate that the impact on regulatory capital from higher taxes could be of as many as 20 basis points, they said in a note on Thursday.

Monte Paschi reported a common equity Tier 1 ratio on transitional basis at 12 percent at the end of September.

With an earlier 2013 restatement, Monte Paschi had classified both transactions as repurchase agreements, while prosecutors have determined the Nomura deal to be a CDS. Consob had previously allowed Monte Paschi to continue to treat Alexandria as a repo in its accounts while asking the bank to include a pro-forma income statement.

Monte Paschi and Nomura agreed to end their deal last month, while the Deutsche Bank transaction was settled in 2013.

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