Italian bank BMPS says ECB sees need for $9.2bn of capital

Bloomberg

The European Central Bank sees Italian lender Banca Monte dei Paschi di Siena SpA needing about 8.8 billion euros ($9.2 billion) of capital to bolster its balance sheet after liquidity deteriorated this month.
The calculation is based on the results of a 2016 stress test, the Italian bank said in a statement, citing two letters from the ECB that it received via Italy’s Finance Ministry. While the ECB saw worsening liquidity at Monte Paschi between Nov. 30 and Dec. 21, it still considers the Italian bank to be solvent. The lender is seeking additional information on the central bank’s calculations.
On Friday, the Italian government said it will plow as much as 20 billion euros into Monte Paschi and other banks after the lender failed in its plan to raise about 5 billion euros from the market.
Chief Executive Officer Marco Morelli had crisscrossed the globe looking for investors to back the bank’s reorganization plan, which included a share sale, a debt-for-equity swap and the sale of 28 billion of soured loans.
Italian daily Il Sole 24 Ore reported on Tuesday that the Italian government will invest 6.3 billion euros in the bank, after the newspaper said that the European Central Bank had called for a 4.5 billion-euro contribution from the Italian state and 4.3 billion euros from bondholders. A government spokesman declined to comment on the matter.

Liquidity Issue
“The number the ECB has mentioned suggests the problems at Monte Paschi are very serious,” Jeroen Blokland, portfolio manager at Robeco Group in Rotterdam, said in e-mailed comments. “The good news is that the ECB thinks Monte Paschi is solvent. So this has turned into a liquidity issue like we saw earlier in Greece.”
Monte Paschi’s net one-month liquidity dropped to 7.7 billion euros from 12.1 billion euros during the Nov. 30-Dec. 21 period, according to the bank’s Dec. 26 statement on the ECB letters.
Ignazio Angeloni, a member of the ECB’s Supervisory Board, told Italian daily La Stampa the central bank “will continue to do everything we can to ensure that the bank finds a sustainable business model.”
Asked if the 20 billion euros of funds approved by the government for Italian banks will be sufficient, Angeloni said the size of the intervention is based on the assumption that in some other cases a capital increase could be carried out on the market.
“The ongoing problems in the Italian banking system do not affect all banks, but only a limited number of them,” Angeloni told the newspaper.
Monte Paschi’s shares are suspended from trading in Milan until full details of the bank’s capital-strengthening are available, Italian stock market regulator Consob said.