Paschi Posts Surprise Profit, Sees Lower Capital Shortfall

Banca Monte dei Paschi di Siena SpA swung to an unexpected quarterly profit after five straight losses and said its future capital shortfall could be lower than previously expected.

The bank reported net income of 119 million euros in the first three months on higher trading income and after extraordinary charges weren’t repeated, according to a statement on Thursday. The bank had been expected to post a loss of about 20 million euros.

Monte Paschi is asking regulators to approve a plan that foresees a merger with a peer as well as a potential capital increase of about 2.5 billion euros. Talks on the bank’s plan are ongoing and the capital increase could take place in the fourth quarter or in the first half of next year. That’s even as the bank sees a lower shortfall then previously expected.

Monte Paschi said it had 700 million euros of excess capital at the end of March, compared with a 300 million euro-shortfall included in its earlier projections. That may lower the bank’s expected capital shortfall at the end of March 2022 to below 1 billion euros.

“Despite the reduced expected shortfall, the capital strengthening plans have not been revised for the time being, pending the outcome of the stress tests to be announced to the market in July,” the lender said.

Italy’s Finance Ministry is seeking to dispose of its majority stake in Monte Paschi, an effort complicated by issues including weak capital levels, restructuring costs and mounting legal risks. The government is focusing on a deal with UniCredit SpA, though talks between the two banks stalled earlier this year with the exit of UniCredit’s Chief Executive Officer Jean Pierre Mustier.

To lure possible buyers, the government is mulling the extension of fiscal benefits for banking mergers and acquisitions that it introduced at the end of last year.

  • Revenue EU823.5 million, +13% y/y, as trading surged to EU160 million from EU30 million year earlier
  • Net fee and commission income EU372 million, +0.6% y/y
  • Provision for loan losses EU76.7 million, estimate EU128.3 million
  • CET1 ratio phasing-in 12.2%

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