* Suffered funding outflows, capital below minimum threshold
* Pop Vicenza and Veneto Banca requested state aid
* Banks must be deemed solvent to receive public support
By Valentina Za
MILAN, March 28 Italy's Banca Popolare di
Vicenza posted a 1.9 billion euro ($2 billion) loss for 2016 and
said it was bleeding deposits, raising doubts over whether
regulators will deem the regional bank viable and approve its
request for state aid.
Popolare di Vicenza and local peer Veneto Banca this month
asked the Italian government for a bailout, following in the
steps of Italy's fourth-largest lender Monte dei Paschi di Siena
The two Veneto-based banks were rescued from bankruptcy less
than a year ago by state-sponsored, privately funded banking
industry bailout fund Atlante, which has pumped 3.4 billion
euros into the two lenders.
They are estimated to need another 5 billion euros to stay
afloat but European authorities have yet to declare them solvent
and approve their restructuring plans.
"State intervention appears as the most realistic option to
recapitalise the bank as tapping markets looks hard," Popolare
di Vicenza said. Its proposed merger with Veneto Banca - which
still has to release its 2016 results - was "indispensable" for
its restructuring, it said.
Popolare di Vicenza said losses stemming mainly from 1.1
billion euros in writedowns of doubtful loans had pushed its
core capital to 8.21 percent in 2016, below a 10.25 percent
threshold set by European Central Bank supervisors.
It also said a key indicator of its ability to meet
short-term cash outflows - the liquidity coverage ratio - fell
to 38 percent at the end of last year, well below an ECB
threshold of 90 percent, after it lost 3 billion euros in direct
funding. The ratio stood at 113 percent in June.
The bank said its liquidity position improved in January
when it issued 3 billion euros in bonds guaranteed by the state
but had worsened again in March as concerns the lender could be
wound up prompted customers to withdraw money.
Unlike Spain and Ireland, Italy failed to help its banks
before strict rules limiting state aid to lenders kicked in last
year, which now impose losses on bank's creditors and large
depositors before tapping public money.
Rome is trying to prop up its most vulnerable lenders under
an exception to those rules as thousands of ordinary Italians
hold domestic banks' shares and bonds.
Popolare di Vicenza, which lost 3 billion euros in
2014-2015, said it expected further significant loan losses this
year due to new guidelines it received from the ECB after a loan
audit last year.
($1 = 0.9230 euros)
(Editing by Louise Ireland)