Italy's bank BMPS posts 3.2 bln euro Q2 loss

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Italy's bank Monte dei Paschi di Siena (BMPS), the country's fourth biggest bank, said Friday it lost more than 3.2 billion euros (3.7 billion US dollars) in the second quarter, after the EU approved a bailout for the stricken lender.

After months of talks with European regulators, the bank completed an 8-billion-euro capital increase to strengthen its finances this week. This included a 3.85-billion-euro cash injection from the state, giving the government an initial stake of about 52.2 percent in the world's oldest bank.

AFP Photo

Therefore, the bank's recapitalization, so-called CET 1 ratio, which is a key measure of financial strength, now standing at 15.4 percent, becomes one of the strongest in Europe.

According to Reuters report, BMPS is selling 26.1 billion euros of bad loans, which will be securitized through a transfer to a privately financed vehicle, with the operation partially funded by bank rescue fund Atlante II in terms of self-rescue.

The bank booked 4 billion euros of writedowns on those loans in the three months to the end of June, as expected.

The entrance of Monte dei Paschi di Siena bank's headquarters is seen in downtown Siena, July 1, 2016. /Reuters Photo

As Italy's fourth-biggest bank, BMPS is disposing of a total 28.6 billion euros' worth of loans near default.

EU officials speaking on condition of anonymity have said the state will have to sell its holding in the Tuscan bank by the end of a five-year restructuring plan that runs through 2021, Reuters report.

Italy has pledged more than 20 billion euros of taxpayer money to rescue BMPS and two other lenders, but the country's wider financial sector is still weighed down by about 300 billion euros of non-performing loans.

AFP Photo

Monte dei Paschi is cutting its workforce by 5,500 to just over 20,000 and shutting almost a third of its branches to ensure it is profitable in the longer term.

Chief Executive Marco Morelli has pledged to get the bank out of "the emergency room" and restore it to health, targeting a net profit of 570 million euros in 2019 and more than 1.2 billion euros in the next two years.

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