Paschi Misses Full-Year Income Target, May Cut Costs More

(Bloomberg) --

Banca Monte dei Paschi di Siena SpA, the state-rescued Italian bank, missed income targets set out in its restructuring plan, which may force the bank to cut an additional 100 million euros ($110 million) of costs.

The Siena-based bank swung to a fourth-quarter loss after it wrote down 1.2 billion euros ($1.3 billion) of deferred tax assets to comply with changes in Italy’s 2020 budget law, it said in a statement on Friday. Net operating income, which excludes the writedowns, totaled 23 million euros on higher revenue and cost reductions.

Monte Paschi is a deep and visible restructuring and relaunching story, Chief Executive Officer Marco Morelli said in a conference call. Additional cost cuts will not affect the bank’s commercial performance, as provisions for 30% of the total have already been made, he said.

Morelli is seeking to turn around the lender by cutting costs, selling non-performing loans and real estate and curbing risk. As part of the strategy, the lender is selling a package of properties and offices, and a buyer may be chosen by the end of the next week, he said.

“Strong bids at well above book value” from two investors have led the bank to engage in a new round of negotiations, according to Morelli. The offering includes Mont Paschi assets in the centers of Milan, Rome, Padua and Florence.

In December, the European Commission and Italian Ministry of Finance agreed to postpone the presentation of a plan for the state to sell off its 68% stake in Monte Paschi “in line with the ongoing discussion regarding a bank de-risking operation.”

The government’s efforts to find investors would be bolstered by the transfer of NPLs to state-backed debt manager AMCO, people familiar with the matter have said. The Italian government is working on a plan to transfer as much as 10 billion euros of soured loans to AMCO with a decision by the European Union expected by the end of February, daily Il Sole 24 Ore reported. Morelli said that the talks are between regulators and the Treasury and the bank is waiting for formal notification.

Asked about a possible renewal of his mandate expiring in April, Morelli said that the decision is in the hands of Ministry of Finance, though he added that after three years “it time to draw the line.”

©2020 Bloomberg L.P.

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