MILAN (Reuters) - Italy's Monte dei Paschi di Siena (MI:BMPS) prepared to unveil a capital-boosting and business plan on Monday under new chief Marco Morelli, as its shares extended a week-long rally buoyed by the prospect of an alternative rescue scheme.
Morelli, the 54-year-old former Italy head of Bank of America Merrill Lynch (N:BAC), took over as CEO of the country's third-largest bank in mid-September, charged with winning investor support for a 5 billion euro ($5.4 billion) fundraising plan.
Drawn up with the help of adviser JPMorgan (N:JPM), the plan also envisages the sale of 28 billion euros in bad loans to keep the bank afloat after it emerged as the weakest lender in Europe in the latest round of industry stress tests over the summer.
"The key planks of the rescue plan should not change much," broker ICBPI said in a note. "We expect a smaller cash call ... thanks to an at least partial conversion of subordinated debt."
Some investors are skeptical over the Tuscan bank's ability to carry out a third share issue in as many years at a time when banking stocks trade at a fraction of their book value as negative interest rates eat into profits.
In a further complication, a referendum vote on Italy's constitutional reform on Dec. 4 risks undermining the government of Prime Minister Matteo Renzi, making investors reluctant to commit until the outcome is known.
Shares in Monte dei Paschi are down 75 percent year-to-date despite a similar-sized rebound over the past week, triggered by the emergence of an alternative rescue package brokered by veteran Italian banker and former industry minister Corrado Passera.
Passera's proposal involves a 2.5 billion euro capital increase reserved for private equity funds including Warburg Pincus and a 1 billion euro share sale to existing Monte dei Paschi investors.
By 0454 EDT shares in Monte dei Paschi were up 11.5 percent.
($1 = 0.9190 euros)