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UPDATE 1-Monte dei Paschi posts 3.4 bln euro loss in 2016 after loan writedowns
February 9, 2017 / 7:50 PM / 10 months ago

UPDATE 1-Monte dei Paschi posts 3.4 bln euro loss in 2016 after loan writedowns

(Adds more details from statement)

MILAN, Feb 9 (Reuters) - Italian bank Monte dei Paschi di Siena, which is being bailed out by the government, booked a net loss of 3.38 billion euros ($3.60 billion) for 2016 after setting aside more money to cover for bad loans.

The bank, which ranked the worst in Europe in stress tests last summer, said in a statement it had recorded 2.6 billion euros in loan loss charges due to “an updated methodology and evaluation” of its problematic loans.

It also booked one-off charges for 411 million euros.

The bank said CET 1 ratio, a key measure of financial strength, stood at a lowly 8 percent at the end of December after it failed to raise money from private investors to plug a capital shortfall. The capital ratio stood at 11.5 percent at end-September.

Highlighting the funding challenges it faces, the bank said direct funding had fallen by 14.7 billion euros at the end of December from a year earlier to 105 billion euros.

This was due to the loss of commercial deposits for 28 billion euros “resulting from the outflows recorded in the course of the year, largely as an effect of tensions ensuing the negative results of the stress test and of the unsuccessful recapitalisation transaction”. The drop was partly offset by repurchase agreements with other banks. “Preliminary data for the month of January sets funding at the same level as the end of 2016, indicating a halt in these outflows,” the Tuscan lender said.

The Rome government is set to take a 70 percent stake in the bank, pumping 6.6 billion euros to fill the bulk of an 8.8. billion euros capital deficit. The rest of the money will come from the forced conversion of subordinated bonds into shares.

But the state aid scheme still needs to be approved by the European Commission, which must also give its green-light to the bank’s yet-to-be-presented restructuring plan. Sources say the process is likely to take until May.

Meanwhile, Monte dei Paschi’s shares, owned by around 150,000 people, have been suspended from trading until more clarity emerges over the state rescue plan. ($1 = 0.9383 euros) (Reporting by Silvia Aloisi; editing by Francesca Landini and Susan Thomas)

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