Paschi swings to profit ahead of capital hike

Bloomberg

Banca Monte dei Paschi di Siena SpA swung to a small quarterly profit as new Chief Executive Officer Luigi Lovaglio seeks to revamp the bailed-out bank ahead of a planned capital raising.
The bank reported a net income of 9.7 million euros ($10.2 million) in the first three months of the year reversing a fourth quarter loss, according to a statement on Friday. The bank had been expected to post a loss of 1.8 million euros according to estimate of analysts surveyed by Bloomberg.
Finance veteran Lovaglio, 66, took the helm in February and is working on the bank’s strategy while reviewing a business plan approved last year by previous management. The lender said it plans to raise 2.5 billion euros to cover capital needs as part of the plan, which is under discussion with European authorities.
Monte Paschi said on Friday that it will present the new business plan on June 23.
The bank hasn’t yet defined the final amount of the capital increase, which could be updated in light of the changing economic circumstances following Russia’s invasion of Ukraine, according to the annual financial report published in March. The fresh funds will enable the bank to cover the gap that emerged in stress tests, new investments and restructuring as well as costs
related to personnel cuts.
Lovaglio said on Friday that he aims to get backing from the European Central Bank
on the plan by the time it is presented to investors.
Lovaglio is seeking to restore bank’s profitability, reduce costs and simplify the structure after the Italian government failed to comply with a European Union requirement that it exit its stake by the end of last year. The government is now in talks with the EU to determine an extension for its exit plan.
The executive said he will focus on efficiency to improve the structure of costs, asset quality and areas that can bring the bank additional revenue.
Monte Paschi has been a financial burden for the Italian government since it was first bailed out in 2009, after being undermined by souring loans and derivatives deals that backfired. It has struggled to deliver consistent profit, given limited room for maneuver under terms the EU set in exchange for backing the aid plan.