Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Monte dei Paschi enlists more banks for cash call, fights legal challenge

Stock Markets Aug 05, 2022 11:00AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: The logo of Monte dei Paschi di Siena bank is seen in a bank entrance in Rome, Italy August 16, 2018. REUTERS/Max Rossi/File Photo

By Valentina Za

MILAN (Reuters) - State-owned Italian bank Monte dei Paschi di Siena (MPS) said four more banks had agreed to back its upcoming 2.5 billion euro ($2.6 billion) cash call, as it moves to fend off a fresh legal challenge.

The Tuscan bank needs more cash five years after an 8 billion euro bailout that handed the state a 64% stake.

Weighed down by a mountain of legal risks following decades of mismanagement, MPS had appeared on course to draw a line under its legal woes after an Italian appeals court in May acquitted all defendants in a major derivatives case, boding well for other pending lawsuits that could feed claims.

A year ago MPS had also reached a landmark accord with its former top shareholder that rid it of some 4 billion euros in extra-judicial claims.

However, the bank on Friday said it had received further judicial claims worth 1.8 billion euros between June and August from a consultancy firm, relating to allegedly incorrect financial information from the bank, leading to 78 million euros in provisions against legal risks in the first half.

The consultancy, which a person with knowledge of the matter identified as Martingale Risk, is acting for various institutional investors. Martingale Risk, whose services include supporting investors seeking to recoup losses, did not reply to requests for comment from Reuters.

Presenting his first set of earnings as chief executive, veteran banker Luigi Lovaglio told analysts the latest claims were not adequately supported by documents and MPS's legal advisers doubted they warranted any provisions, but it had decided to set aside money anyway.

MPS said Barclays (LON:BARC), Santander (BME:SAN), Societe Generale (OTC:SCGLY) and Stifel had joined BofA, Citi, Credit Suisse and Mediobanca (OTC:MDIBY) in signing a preliminary agreement to pick up any unsold shares in the cash call.

The agreement comes against the backdrop of recession fears and Italy's political instability, which have heightened risks for underwriters. MPS's market value of just 440 million euros limits the potential discount on the new shares and makes them expensive relative to peers, analysts say.

Underwriters for Italian energy firm Saipem last month ended with 30% of a 2 billion euro share issue on their books.


Goldman Sachs (NYSE:GS) analyst Jakub Lichwa told the MPS call the widening of the consortium was "obviously positive" news for the bank, but raised questions about how strong the commitment was.

"I'm a little bit surprised that you've got quite a lot of banks joining the exercise in the context of the operating environment," Lichwa said.

MPS had said in June the signing of the original underwriting contract was subject to a number of standard conditions, including positive feedback from investors.

CFO Andrea Maffezzoni said nothing had changed since then.

"Despite the quite difficult environment I'm confident (in the success of the cash call)," Lovaglio said, ruling out the state raising its stake by covering more than 64% of the rights issue.

MPS must place 900 million euros with private investors to avoid breaching European Union state aid laws.

Despite the fresh provisions against legal risks, MPS posted a 17.5 million euro ($18 million) second-quarter net profit after loan writedowns needed to ease disposals, up from 9.7 million euros in the first quarter.

Improved lending margins more than offset weaker net fees amid tough markets and a much smaller contribution from trading income.

MPS said it had agreed to sell impaired loans worth 900 million euros, allowing it to cut problem debts as a share of total lending to 3.9%.

The reduction of bad debts is among fresh restructuring commitments Italy agreed this week with the European Commission when it secured an extension of an initial end-2021 deadline to re-privatise MPS.

The Tuscan bank said it expected the European Central Bank to approve its proposed capital raising in time for a shareholder vote on the share sale on Sept. 15.

($1 = 0.9777 euros)

Monte dei Paschi enlists more banks for cash call, fights legal challenge

Related Articles

Micron tempers fourth-quarter revenue forecast
Micron tempers fourth-quarter revenue forecast By Reuters - Aug 09, 2022

(Reuters) - Memory chipmaker Micron Technology (NASDAQ:MU) said on Tuesday that its fourth-quarter revenue may come in at or below the low end of the forecast range provided on...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email