Monte dei Paschi to Cut Jobs, Sell Units in Bid to Win Support for Rescue Plan
25 October 2016 - 7:40PM
Dow Jones News
MILAN—Troubled Italian lender Banca Monte dei Paschi di Siena
SpA on Tuesday said it would cut 2,600 jobs, shut 500 branches and
sell business units as part of a make-or-break plan aimed at
persuading skeptical investors to buy into a multibillion-euro
capital increase.
The bank plans to cut personnel costs by 9%, accelerate
investment in digital banking and place greater focus on its retail
and small business channels to achieve a net profit of more than
€1.1 billion ($1.2 billion) by 2019.
It will also sell its bad-loans recovery unit and its Merchant
Acquiring business activities, for which it has already received a
€520 million offer from Istituto Centrale delle Banche Popolari
Italiane SpA.
The bank's new strategy is crucial to convince investors to
support its efforts to regain financial footing and resolve its
troubles with souring loans.
In July, the lender announced plans to raise â,¬5 billion in
fresh equity and sell off €28 billion of bad loans. The bank said
Tuesday it had called a shareholder meeting for Nov. 24 to approve
the recapitalization plan, which it aims to complete by the end of
the year.
The plan is being closely watched as Monte dei Paschi, which was
the worst-capitalized bank in recent stress tests carried out by
the European Banking Authority, has been a source of major
instability for Italy's banking system.
The Tuscan bank has already tapped shareholders twice for €8
billion in fresh funds in the past few years, but its stock-market
value is only about €1 billion. Since the beginning of the year,
the bank's shares have lost almost three quarters of their
value.
If Monte dei Paschi fails to execute its plan it would be a
major headache for the Italian government, which is betting on a
solution to the lender's woes as a major step toward restoring
confidence in the country's battered banks.
The bank's new strategy has been pieced together by recently
appointed Chief Executive Marco Morelli, a veteran Italian banker
and former executive at Monte dei Paschi, who was brought in after
the bank's former CEO and chairmen were ditched amid muted investor
enthusiasm for the capital raising part of the plan.
The bank confirmed Tuesday it may ask junior bondholders to swap
debt for equity before completing the new shares sale and that it
may reserve a part of the capital increase to new investors willing
to buy a large portion of the new shares and another part to
existing shareholders.
It appointed J.P. Morgan to lead the work on evaluating and
selling the bad loans into a separate vehicle, which will likely be
funded with a loan from it and other banks. The U.S. bank, together
with Mediobanca SpA, has been casting about for investors who will
pump fresh capital into Monte dei Paschi.
In terms of the new strategy, the bank said it plans to rekindle
its mortgage business by boosting volumes of new mortgages to €6
billion in 2019, from the current level of €2.3 billion.
It also plans to grow its asset management and insurance
business. The bank also confirmed it will go on with its plans to
spin off its bad loans recovery unit.
Monte dei Paschi also said it posted a net loss of €1.15 billion
for the third quarter, compared with a net profit of €255.8 million
for the same quarter of last year. The loss was largely the result
of €1.3 billion of provisions for bad loans the bank booked for the
quarter.
Write to Giovanni Legorano at giovanni.legorano@wsj.com
(END) Dow Jones Newswires
October 25, 2016 04:25 ET (08:25 GMT)
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