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UPDATE 1-Carige plans 450 mln euro share issue, bad loan spin-off
February 28, 2017 / 9:06 PM / 10 months ago

UPDATE 1-Carige plans 450 mln euro share issue, bad loan spin-off

* Regional bank eyes problem loan ratio of 13 pct in 2020

* Ratio was 34 pct in 2016

* Will consider debt-to-equity deal for junior debt

* To seek ECB approval of plan to spin off bad loans (Recasts with details)

By Valentina Za

MILAN, Feb 28 (Reuters) - Italian regional lender Banca Carige plans to raise up to 450 million euros ($478 million) selling new shares as it tries to cut its soured loans to meet European Central Bank demands.

The Genoa-based lender joins a growing number of Italian banks that are being forced to tap investors to be able to shake off a bad loan burden that grew during a harsh recession.

Carige said it aimed to cut its impaired debts to 13 percent of total loans to 2020, from 34 percent at the end of last year.

Carige trades at just 10 percent of its book value and has long been dogged by concerns it would need more capital despite two cash calls in 2014 and 2015 for 1.65 billion euros.

Top shareholders are local businessmen Vittorio Malacalza and Gabriele Volpi, with stakes of 17.6 and 6 percent respectively, and London-based Toscafund Asset Management with 5 percent.

In addition to selling new shares, Carige said it would consider converting some of its riskier debt into equity.

CEO Guido Bastianini told analysts the bank would start discussing such an offer with holders of Tier 1 and Tier 2 bonds in coming days.

He said Carige would seek ECB approval of a plan to spin off at least 2.4 billion euros in bad loans into a separate vehicle owned by Carige’s shareholders.

Italy’s largest bank UniCredit successfully concluded a 13 billion euros share issue on Monday, which paved the way for the sale of 18 billion euros in bad loans to a vehicle majority-owned by investment funds Fortress and Pimco.

But Monte dei Paschi had to put on hold its bad loan disposal plan as it failed to raise the capital needed to complete it and has now turned to the state for help.

Italy failed to help its banks before strict rules limiting state aid to lenders came into force last year and its banks have struggled to offload bad debts as they can only sell at a loss, burning through capital.

Carige said that, under its plan, it would cut its total branches to below 500 to reach a cost-income ratio of 60 percent and a return on equity of 7.4 percent in 2020.

It will seek to grow revenues to 756 million euros in 2020 from 655 million euros in 2016 despite keeping net lending little changed at 18 billion euros.

$1 = 0.9419 euros Reporting by Valentina Za; editing by John Stonestreet

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