Monte dei Paschi investors back latest cash call

View of the entrance to the headquarters of Monte dei Paschi di Siena (MPS), the oldest bank in the world. Picture taken August 11, 2021. REUTERS/Jennifer Lorenzini

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SIENA, Italy, Sept 15 (Reuters) – Shareholders in Monte dei Paschi di Siena (MPS) (BMPS.MI)on Thursday approved the sale of new shares for up to 2.5 billion euros ($2.5 billion), while doubts linger on whether the state-owned bank can pull off its latest cash call.

Five years after a bailout that handed the state a 64% stake, MPS needs more money to cut costs by shedding thousands of staff through costly early retirements, and to replenish its capital buffers.

Chief Executive Luigi Lovaglio is working to launch MPS’ seventh share issue in 14 years in the middle of October, soon after national elections but before a new government is formed.

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Stagflation fears roiling financial markets complicate Lovaglio’s task, with MPS unable to offer a sufficient discount on its new shares after it lost 60% of its market value this year.

Lovaglio, a respected former UniCredit executive whom the Treasury recruited after failing to sell MPS to UniCredit, has secured a pre-underwriting accord with a group of eight banks led by Bank of America, Citi, Credit Suisse and Mediobanca.

The underwriters have the right to walk away if feedback from investors is negative. A person close to the consortium said the banks would assess the market situation after investor meetings Lovaglio will hold in London next week.

MPS’ commercial partners, asset manager Anima Holding (ANIM.MI) and insurer Axa , are open to providing capital to the Tuscan bank in exchange for a strengthening of their commercial agreements, people familiar with the matter have said.

Lovaglio has refrained so far from holding discussions with either Anima or AXA because stronger commercial ties would make it harder for MPS to seek a merger partner in the future to allow Rome to cut its stake.

Lovaglio told shareholders Axa and Anima were welcome to invest in the cash call on the same terms as other investors.

“A potential revision of our commercial partnerships cannot but follow the usual rationale for this type of accord, and in the best interests of the bank,” he added.

Anima could be willing to contribute up to 250 million euros, one of the people said. News of Anima’s support have lifted MPS shares this week and its subordinated bonds, which had been hit by fears of conversion into equity.
($1 = 1.0026 euros)

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Reporting by Silvia Ognibene in Siena and Valentina Za in Milan;
Editing by Keith Weir

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