Italy Looks to Sell Monte Paschi Branches Amid Talks With EU

(Bloomberg) -- Italy is looking to sell branches of Banca Monte dei Paschi di Siena SpA even before it finds a buyer for the whole lender, people familiar with the matter said.

Another state lender, Mediocredito Centrale - Banca Del Mezzogiorno SpA, would buy as many as a few dozen Monte Paschi branches in southern Italy, as part of the bank’s restructuring plan under discussion with European authorities, the people said, asking not to be named discussing confidential deliberations.

The government is seeking approval from the European Union for a five-year business plan to revamp Monte Paschi and to set a new deadline to exit the bailed-out lender after talks with UniCredit SpA collapsed last year. Job reductions and 2.5 billion euros ($2.8 billion) capital increase are among measures under review.

Italy will probably be given 18 months to complete the sale of Monte Paschi, the people said, which should entail a gradual reduction of the bank’s size. One of the initial steps could be the sale of branches, according to the people who added that the talks with the EU are set to conclude by March.

Meanwhile, Italy’s government is looking to replace Monte Paschi’s chief executive officer Guido Bastianini, the people said, but the finance ministry, which owns the majority of the bank, hasn’t settled on a candidate.

Spokespeople for Monte Paschi, the finance ministry and Mediocredito declined to comment.

Monte Paschi has been a financial burden for the Italian government since it was first bailed out in 2009, after being undermined by souring loans and derivatives deals that backfired. It has struggled to deliver consistent profit, given limited room for maneuver under terms the EU set in exchange for backing the aid plan.

Talks on selling Monte Paschi to UniCredit came to a halt over the question of how much capital Italy should inject, leading to the Treasury’s failure to meet the end-of-last-year deadline to exit the bank.

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