MILAN — Monte dei Paschi di Siena secured approval from the European Central Bank on Monday for its planned capital raising, though the state-owned Italian bank still needs to overcome volatile markets.
Shareholders in Monte dei Paschi (MPS) – 64% owned by the state after a 2017 bailout – vote on Sept. 15 on its plans to sell new shares for up to 2.5 billion euros ($2.5 billion) by mid-November.
MPS needs the money to send some staff into early retirement, invest in technology and bolster capital reserves.
Stagflation concerns rocking markets complicate prospects for the cash call, bankers and analysts say, with MPS unable to offer an attractive discount on the new shares due to size of the issue relative to its fast-shrinking market value.
In a further challenge, snap elections in Italy on Sept. 25 could stoke volatility in the coming weeks as a new government is formed.
Italy’s Treasury sees the political situation as the main risk for the cash call, two people briefed on discussions said. However, bankers working on the transaction expressed concerns also about wider market volatility.
Shares in MPS were down 5% at 1427 GMT, bringing the overall loss year-to-date to 66% and giving it a market value of 319 million euros, according to Refinitiv data.
Five years ago Italian taxpayers and private investors pumped 8 billion euros into the Tuscan bank to keep it afloat.
The two sources said Italy’s Treasury did not feel bound to hit the 2.5 billion euro maximum target and would be comfortable also with a slightly lower amount.
The state will contribute 1.6 billion euros towards the capital raising based on the size of its stake, with the rest due to come from private investors to avoid breaching European Union state aid rules.
The Treasury wants to secure accords with several anchor investors ready to back the cash call ahead of its launching, the two people said without providing details.
They ruled out suggestions the capital raising could be split into tranches, a possibility mentioned in Italian press reports. ($1 = 1.0076 euros) (Reporting by Valentina Za and Giuseppe Fonte Editing by Mark Potter)