ECB approves Monte dei Paschi capital increase amid uncertain markets

MILAN, Sept 5 (Reuters) – Monte dei Paschi di Siena (BMPS.MI) won European Central Bank approval for its fundraising project on Monday, although the Italian state-owned bank has yet to weather market volatility .

The shareholders of Monte dei Paschi (MPS) – 64% owned by the state after a bailout in 2017 – vote on September 15 on its plan to sell new shares up to 2.5 billion euros (2.5 billion) by mid-November.

MPS needs cash to send some employees into early retirement, invest in technology and bolster capital reserves.

Fears of stagflation rocking markets are complicating cash call prospects, bankers and analysts say, with MPS unable to offer an attractive discount on new shares due to the size of the issue relative to its rapidly diminishing market value. Read more

In another challenge, early elections in Italy on September 25 could stoke volatility in the coming weeks as a new government is formed.

Italy’s treasury sees the political situation as the main risk to the fundraising, said two people briefed on the talks. However, bankers working on the deal also expressed concerns about the broader market volatility.

MPS shares fell 5% at 1427 GMT, taking the overall year-to-date loss to 66% and giving it a market value of 319 million euros, according to Refinitiv data.

Five years ago, Italian taxpayers and private investors injected 8 billion euros into the Tuscan bank to keep it afloat.

Both sources said the Italian treasury did not feel pressured to meet the maximum target of €2.5bn and would also be comfortable with a slightly lower amount.

The state will contribute €1.6 billion to the capital raising depending on the size of its stake, with the rest to come from private investors to avoid breaching European Union rules. state aid.

The Treasury wants to secure agreements with several anchor investors willing to back the fundraising before its launch, the two people said without providing details.

They ruled out suggestions that the capital raise could be split into tranches, a possibility raised in the Italian press. find out more ($1 = 1.0076 euros)

Reporting by Valentina Za and Giuseppe Fonte Editing by Mark Potter

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