Weekend Economists Pull the Easter Rabbit Out of the Hat April 18-20, 2014

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34. Monte Paschi Seeks EU5 Billion to Repay Aid, Build Buffer

http://www.bloomberg.com/news/2014-04-18/monte-paschi-seeks-5-billion-euros-to-repay-aid-build-buffer.html

Banca Monte dei Paschi di Siena SpA, the bailed-out Italian bank, will seek 5 billion euros ($6.9 billion) of capital from investors to repay state aid and build a buffer as regulators review European lenders’ assets.

Monte Paschi’s board agreed to boost the planned rights offering to 5 billion euros from the 3 billion euros it announced in November, the Siena-based company said in a statement today. It increased the size to have a capital buffer to absorb “eventual negative impacts” from the European Central Bank’s asset quality review, the bank said.

Chief Executive Officer Fabrizio Viola is seeking to turn around Italy’s No. 3 bank, engulfed in legal probes of alleged misconduct by former managers, by cutting jobs and selling assets to return to profit by 2015. The CEO is asking investors for more capital after he agreed to partly repay 4.1 billion euros in state aid before an EU-imposed deadline of this year.

“The new size, approved unanimously by the board, is good news both for the bank, because it will strengthen capital, and Italy, because it will allow reimbursement of state aid at a time when the government is seeking resources to finance its economic plan,” Viola said in an interview with broadcaster SkyTG24. The offer will start around mid-June, he said.