Photographer: Alessia Pierdomenico/Bloomberg

Carige Plunges as ECB Demands Funding Plan on Deposit Drop

  • Italian bank restates loss for 2015 on bigger writedowns
  • Carige raised capital a year ago after ECB stress test failure

Banca Carige SpA dropped as much as 11 percent after the European Central Bank requested the Italian bank present a new funding plan amid a slump in deposits and deepening loss.

The ECB instructed Carige to submit a new funding plan by the end of the month and a strategic review by the end of May to restore compliance with supervisory requirements, it said in a statement late Thursday. The Genoa-based lender restated its 2015 net loss to 102 million euros ($112 million) from 45 million euros and said it’s experiencing a drop in deposits this year.

Carige Chief Executive Officer Piero Luigi Montani has struggled to strengthen the bank’s balance sheet and restore investor confidence after the lender was forced to plug a capital deficit that was brought to light during the ECB’s industry heath check by selling 850 million euros in stock. Carige’s shares have slumped about 75 percent over the past year, giving it a market value of 476 million euros.

“It is a little counterintuitive to see a regulator forcing a bank to admit it basically experienced a ‘bank run’ which, as far as we believe, was related to external issues,” Fabrizio Bernardi, an analyst at Fidentiis Equities, wrote in a note Friday.

The shares dropped 9.7 percent to 57 cents at 9:58 a.m. in Milan. The Bloomberg Europe Banks and Financial Services Index has declined about 16 percent this year, with Italian lenders among the worst performers.

The bank has about 2 billion euros in cash and its liquidity coverage ratio stands at 100 percent, compared with an ECB requirement of 90 percent, Carige said in the statement. Its assets fell to about 30.2 billion euros at the end of 2015 from 38.3 billion euros a year earlier.

The ECB is increasing pressure on the weakest Italian banks to restore their capital levels, strengthen finances and address governance after they showed the biggest shortfalls in 2014 stress tests. Bad loans in the country have hit 360 billion euros, hindering Italian banks’ ability to expand lending and holding back the country’s recovery from recession.

ECB Pressure

The central bank last month sent a letter to Banca Popolare di Vicenza SCpA, threatening the lender’s resolution if it doesn’t implement all steps of its restructuring plan. The lender will ask shareholders on Saturday to approve a survival plan that depends on finding investors that are willing to buy as much as 1.8 billion euros of stock. It would be the third time the loss-making bank has tapped investors in as many years.

Other lenders are also struggling to raise buffers, with Banca Monte dei Paschi di Siena SpA reporting a fourth-quarter loss after sharing the costs of winding down four of the country’s banks. Under pressure from the ECB, CEO Fabrizio Viola has been seeking a buyer for Italy’s third-largest lender.

The Malacalza family, Carige’s largest investor with a 18 percent stake, is seeking to replace Montani with Banca Profilo SpA Chairman Guido Bastianini and bring in Giuseppe Tesauro as chairman to take over from Cesare Castelbarco Albani. The bank is scheduled to hold its shareholders meeting on March 31.

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