Monte Paschi Posts Yearly Profit After Restating Accounts

  • Without restatement, bank would have suffered loss for 2015
  • World's oldest bank seeking buyer under regulatory pressure

Banca Monte dei Paschi di Siena SpA, the Italian bank seeking a buyer, swung to a profit of about 390 million euros ($427 million) for 2015 after regulators ordered it to restate a derivative transaction. The shares rose.

The bank returned to a full-year profit after revised accounts for parts of 2014 to comply with a request from Italy’s market watchdog boosted earnings by 500 million euros, it said in a statement on Thursday. Without that move, Monte Paschi would have posted a loss of 110 million euros.

The results “show signs of recovery for this restructuring story,” Luigi Tramontana a Milan-based analyst at Banca Akros SpA who has a buy recommendation on the stock, wrote in a report on Friday. The bank showed a strong liquidity position, “adequate to absorb pressure in direct funding related to recent market volatility.”

Monte Paschi rebounded in Milan trading, gaining as much as 9.3 percent after slumping 7.9 percent on Thursday. The shares rose 2.9 percent to 67.4 cents at 10:21 a.m. in Milan, giving the lender a market value of about 2 billion euros.

The shares have lost about 41 percent this year as investors grew more concerned about Italian lenders’ credit quality. The slump continued Thursday even after Italy reached agreement with the European Union on a plan to let the country’s banks offload soured loans with a state guarantee.

Monte dei Paschi’s counterbalancing capacity, a measure of funds the bank can access for liquidity, held at about 24 billion euros in the year’s last three months. The common equity Tier 1 ratio, a measure of financial strength, held at 12 percent in the fourth quarter. That’s above the 10.2 percent required by European regulators for this year.

‘Positive Aspects’

Chief Executive Officer Fabrizio Viola is seeking to restore profitability and bolster the finances of Italy’s No. 3 bank by reducing risk and selling assets. After tapping investors for funds to replenish capital, Viola has been seeking a buyer under pressure from the European Central Bank.

There are no concrete merger options at present, Viola said in an interview with Sky TG 24, on Thursday. The CEO said in a separate interview with la Repubblica on Friday that the idea of a merger with Unione di Banche Italiane SpA offers “positive aspects,” particularly due to lack of a geographic overlap.

Deposit Outflows

Direct funding dropped by 3.6 billion euros during 2015 to 119.3 billion euros, the bank said. Deposit outflows have stabilized in the last few days, Viola said. Last week, Monte Paschi said the lender was experiencing some client withdrawals.

Gross deteriorated loans stood at about 46.9 billion euros at the end of December, down 600 million euros from September, the lender said. Monte Paschi sold about 1 billion euros of non-performing loans in December to a company backed by affiliates of Deutsche Bank AG.

Current accounts and deposits stood at 68.9 billion euros, up 7 percent from a year earlier, the company said.

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