Italy's Monte Paschi's Shares Drop as Disappointing Q3 Results Can Impact 2014 Stock Sale

Banca Monte dei Paschi di Siena's (MPS) shares have fallen as a disappointing third-quarter trading statement raises doubts about the troubled bank's ability to execute a stock sale in 2014, and avoid nationalisation.

Monte Paschi's stock was trading 2.18% lower to €0.220 at 13:04 hrs CET in Milan.

On 14 November, Italy's third-largest lender said that its third-quarter net loss widened to €138.3m (£115.6m, $185.9m), from €25.9m a year ago.

Loan-loss provisions grew to €511m in the July-September quarter, against €461m a year ago.

The bank reported a net loss of €518m (£433m, $697m) in the nine months to 30 September.

The Siena-based lender said its net exposure to bad debts hovered at €20bn at the end of September.

The world's oldest bank, which came close to financial collapse during the eurozone debt crisis, must raise €2.5bn through a stock sale in 2014 - more than double the amount originally proposed by its managers.

Failure to do so would result in the nationalisation of the bank - with the Italian government converting state loans into equity.

Chief Executive Fabrizio Viola told analysts on a 14 November conference call that the bank had three potential windows to initiate the share sale - January 2014, June or the end of that year.

"It's clear that the more time goes by, the more difficult it gets," Viola added.

Turnaround Plan

On 7 October, MPS made public a radical turnaround plan that entails 8,000 job cuts and aims for €440m in cost savings. The bank has already laid off 2,700 employees.

Under the new plan, MPS intends to repay its state loans fully by 2017, and expects to report a net profit of €900m by that date. The bank plans to repay €3bn to the government in 2014.

The bank proposes to reduce its €23bn Italian government debt portfolio to about €17bn by end 2017.

The bank also said it would cap top executives' pay packages, at €500,000 a year, until the capital increase is completed or the state aid is fully repaid.

The moves are aimed at appeasing the European Union, which has to approve Monte Paschi's €4.1bn (£3.4bn , $5.5bn) rescue aid.