Paschi Advances 52% This Week as Board Reaffirms Capital Plan

  • Lender’s board set to approve new business plan on Oct. 24
  • Bank continues with recapitalization, disposals of bad loans

Banca Monte dei Paschi di Siena SpA extended gains in Milan trading, bringing the share’s advance to about 52 percent this week, after the Italian lender said it’s pressing ahead with a plan to bolster capital and sell soured loans.

The shares jumped as much as 15 percent and were up 9.2 percent to 26 cents at 10:10 a.m. They extended gains for a second straight week, paring losses this year to about 78 percent. Monte Paschi’s board said late Tuesday that it’s conducting an in-depth analysis of a business plan that will be approved on Oct. 24, while pushing ahead with a recapitalization of the ailing lender and disposals of non-performing loans.

Chief Executive Officer Marco Morelli, who took over last month, is seeking to raise 5 billion euros ($5.4 billion). The bank, based in Siena, Italy, has said it’s readying a third share sale in two years and preparing to offload 28 billion euros of non-performing loans through sales and securitizations.

The recapitalization plan was discussed by Morelli at a board meeting last week and includes 3,000 job cuts, Corriere della Sera reported on Tuesday, without citing anyone.

The board also continues to study a proposal from Corrado Passera, Italy’s ex-minister for economic development. The plan, submitted last week, envisages a 5 billion-euro capital increase, including a 1 billion-euro share sale to existing shareholders and 2.5 billion euros in investment from new long-term backers, a person familiar with the matter has said.

The lender, bailed out twice by Italy’s government since 2009, has already tapped investors for 8 billion euros in the last two years. Monte Paschi appointed Morelli as CEO in September, replacing Fabrizio Viola, after it emerged from stress tests as the region’s most vulnerable lender to severe economic shock.

Italian banks are among the worst-performing European lenders this year as investors question their ability to cope with a mountain of soured loans and comply with stricter capital requirements.

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