Monte Paschi Agrees to Sell Non-Performing Loans to Epicuro

  • Most of the loans soured before 2009, Italian bank says
  • Epicuro is a company financed by affiliates of Deutsche Bank

Banca Monte dei Paschi di Siena SpA agreed to sell non-performing loans with a book value of about 1 billion euros ($1.1 billion) to Epicuro SPV, a company backed by affiliates of Deutsche Bank AG, as the world’s oldest bank seeks to shore up its finances.

Most of the loans became non-performing before 2009, the Italian bank said in a statement on Monday. The deal will have a negligible impact on Monte Paschi’s earnings and be completed by the end of the year. The portfolio is composed of almost 18,000 borrowers.

Chief Executive Officer Fabrizio Viola is bolstering the bank’s finances by reducing risk and divesting assets after tapping investors twice in less than two years. In June, Monte Paschi sold 1.3 billion euros of non-performing loans to Cerberus Capital Management LP and Banca Ifis SpA.

The portfolio sale is consistent with Monte Paschi’s 2015 to 2018 business plan, which forecasts as much as 5.5 billion euros of NPL disposals, according to a note from brokerage Fidentiis, which has a sell rating on the bank’s shares.

The Siena, Italy-based lender said Dec. 16 that it will restate its financial accounts to comply with a request from Italy’s stock-market watchdog Consob that the bank change how it booked a transaction with Nomura Holdings Inc. Consob asked the bank to amend its 2014 and first-half accounts to reflect the deal dubbed Alexandria should be treated as a credit-default swap instead of a repurchase agreement.

Milan prosecutors found new information this year as they investigated the transaction, which the former management had used to hide losses, the bank said, citing Consob’s request. The restatement should have a positive impact of 714 million euros before taxes on 2015 results, while it will be neutral on capital.

Monte Paschi has been engulfed by legal probes into former managers who had covered losses with the Nomura transaction and a similar deal with Deutsche Bank AG. The lender is now seeking a buyer to help restore profit as bad loans mount.

The bank rose as much as 3.5 percent to 1.29 euros in Milan, the highest since Dec. 10. The shares were up 2 percent to about 1.27 euros at 10:39 a.m., giving Monte Paschi a market value of 3.73 billion euros.

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