Monte dei Paschi CEO steps down as cash call looms

Monte-dei-Paschi-CEO-steps-down-as-cash-call-looms

MILAN Fabrizio Viola, the chief executive of troubled Italian lender Monte dei Paschi di Siena, has agreed to quit, adding to uncertainty over a rescue plan the bank must implement to avert the risk of being wound down.

The Tuscan bank said on Thursday it was working to appoint a successor quickly and that Viola would remain in place until a successor is found.

One senior source with knowledge of the matter said the bank had “basically” identified a successor for Viola, refusing to give more details.

Another source said Corrado Passera, who has served as industry minister and been CEO of bank Intesa Sanpaolo, was a frontrunner for the job.

Passera, backed by investment bank UBS, presented a last-ditch rival bailout plan for Monte dei Paschi in July but was rebuffed by the bank’s board.

A local news outlet cited the name of Marco Morelli, a former chief financial officer of Monte dei Paschi and currently head of Merrill Lynch in Italy as a potential successor. A source close to him said he had not been contacted for now.

Time is not on Monte dei Paschi’s side as the lender must launch a capital increase of up to 5 billion euros ($5.6 billion) before the end of the year as part of a privately-funded bailout agreed with the European Central Bank.

The health of Italy’s third-largest lender poses a threat to the wider banking system, the savings of thousands of small investors and also to the weakening political standing of Prime Minister Matteo Renzi, who faces a make-or-break constitutional referendum.

But the troubled lender, which emerged as Europe’s weakest bank in stress tests in July, faces an uphill task convincing investors to buy into such a big share issue — its third recapitalization in as many years.

INVESTOR PRESSURE

The bank gave no reason for the departure of Viola, who took charge of Monte dei Paschi in 2012 just as the lender was on the brink of collapse because of the euro zone debt crisis.

However, one source close to the situation said institutional investors were demanding a change at the top before committing money to back the bank.

Several bankers have also said it would be difficult for Viola, who had already tapped the market for cash in 2014 and 2015, to lead another fundraising.

Further complicating the picture is a constitutional referendum on which Renzi has staked his job, expected to be held in late November or early December.

According to a banker close to the situation investors want to see the outcome of the vote before deciding whether to buy into Monte dei Paschi’s capital increase. A defeat for Renzi would increase political uncertainty and dampen sentiment towards Italian assets.

With larger Italian bank UniCredit also expected to launch a multi-billion euro capital increase in coming months, the two banks could find themselves courting investors at the same time.

Wary of the risks, JP Morgan and Mediobanca, global coordinators for the Monte dei Paschi’s cash call, are working on a possible conversion of the bank’s subordinated bonds into shares to limit the reduce to size of the capital increase by around 2 billion euros, sources have said.

(additional reporting by Paola Arosio, Stefano Bernabei and Silvia Ognibene; Editing by Keith Weir)

News Source ReutersNews

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