Monte dei Paschi to Raise $2.8 Billion for New Strategic Plan

By Joshua Kirby

Banca Monte dei Paschi di Siena SpA is to raise 2.5 billion euros ($2.8 billion) through a capital increase next year as part of a new mid-term plan after the failure of the Italian government's efforts to sell the lender to peer UniCredit SpA.

Funds from the capital raise will be used for investment in I.T., for restructuring expenses, and to cover 2020 stress-test indications and current equity requirements, MPS said in a statement late Friday.

The new plan to 2026 replaces one approved last December and submitted to the European Central Bank and European Union regulators, whose approval is a prerequisite for the new capital strengthening, MPS said.

Under the plan, the bank envisions a cost-income ratio below 60% by 2024 with further reductions beyond then, and a fully-loaded CET1 ratio above 14% in 2024 and at around 17.5% in 2026, before dividends and any positive DTA reassessment. The previous plan laid out a phased-in CET1 ratio consistently above 12%, MPS said at the time.

The bank is also targeting pretax profit of EUR700 million in 2024, and return on tangible equity of around 11% by 2026. The plan depends on commercial momentum in net interest income and commissions, as well as savings from a voluntary job-exit scheme. Savings of around EUR275 million a year could be largely achieved by 2024, depending on negotiations with labor unions, MPS said.

The struggling bank was bailed out by the Italian government in 2017 and faces an EU deadline to re-privatize it. Exclusive talks with larger peer UniCredit began this summer over a deal, but collapsed within months.

Write to Joshua Kirby at [e-mail]; @joshualeokirby

(END) Dow Jones Newswires

December 20, 2021 02:05 ET (07:05 GMT)

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