Monte dei Paschi appoints restructuring expert as CEO as loan losses rise slightly


A man walks in front of the Monte Dei Paschi di Siena bank in downtown Milan July 23, 2010. REUTERS/Stefano Rellandini

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  • Appoints veteran UniCredit executive Luigi Lovaglio as CEO
  • Lovaglio has a cash call of 2.5 billion euros to see through
  • Fourth quarter loss impacted by loan loss provisions

MILAN, Feb 7 (Reuters) – Italy’s state-owned bank Monte dei Paschi di Siena (MPS) (BMPS.MI) appointed restructuring veteran Luigi Lovaglio as chief executive on Monday as Rome seeks a new path for the lender after failing to unload this last year.

MPS is negotiating new recovery targets with European authorities ahead of a 2.5 billion euro ($3 billion) fundraising that will raise the bill for Italian taxpayers, although MPS must also convince private investors to participate.

Increasingly unhappy with the management of the Tuscan bank it rescued in 2017, Italy’s Treasury decided to oust Guido Bastianini as CEO after last year’s failed bid to sell it to a stronger rival, UniCredit (CRDI.MI), sources told Reuters last month.

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Following the failure of the talks, Italy is currently negotiating with Brussels for a new deadline to reduce the 64% stake in MPS which it acquired after spending 5.4 billion euros to save Italy’s fourth-largest bank.

MPS reported a fourth-quarter loss of 79 million euros on Monday after setting aside 222 million euros in the period against loan losses.

Revenues rose 3.2% quarter-on-quarter, but inflows of degraded loans also increased, leading MPS to classify as impaired 3.7% of loans for which borrowers had taken a payment holiday now expired.

MPS said it also recognized losses on past securitization sales of bad debts.

DEFICIT

The bank’s board voted unanimously on Monday to appoint Lovaglio, 66, as chief executive after stripping Bastianini of his powers, although the former chief executive remained a director as he resisted pressure to resign.

Bastianini, formerly at regional loanee Carige, took the role in 2020 after predecessor Marco Morelli declined to serve for another term.

Bastianini’s appointment was sponsored by the 5 Star Movement, which is part of Italy’s ruling coalition and has always advocated for the postponement of the reprivatization of the MPS.

Italy wants to push back the deadline to put the MPS in private hands beyond 2023 and keep it a secret, after the previous deadline for messy talks with UniCredit, sources said.

Talks with the EU are ongoing and MPS finance chief Giuseppe Sica gave no indication of the timeline on Monday. He said MPS would try to act quickly, although improving its capital position meant it didn’t have to rush.

MPS said it could have a capital shortfall of €150m this year, reaching as high as €500m in March 2023.

During a career spanning more than four decades at UniCredit, Lovaglio led the Polish unit of the Pekao Group (PEO.WA) from 2011 until 2017, when UniCredit sold its majority stake.

In 2019, Lovaglio took the reins of regional bank Creval and steered it towards takeover last year by Credit Agricole Italy (CAGR.PA).

($1 = 0.8741 euros)

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Reporting by Valentina Za and Giuseppe Fonte Editing by David Goodman and Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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