Italian bank getting back on feet after $10bn bailout

Bloomberg

Italian bank Monte dei Paschi di Siena is slowly turning a corner after last year’s 8 billion euro ($10 billion) bailout, its chief executive said, flagging an increase in both lending and client funding. Italy’s fourth-largest lender, laid low by mismanagement and a large bad loan pile, has long been Rome’s biggest banking headache and is now 68 percent owned by the state. Political uncertainty in Italy after an inconclusive election last month has heightened concerns over the bank’s turnaround process. Monte dei Paschi must meet restructuring goals agreed with EU competition authorities to clear the rescue.
Answering a question by a shareholder at the annual general meeting, the bank said one of the targets was a net profit margin, or revenues minus operating costs, of at least 1.2 billion euros in 2018. Additional cost cuts would be needed if the bank failed to meet that, unless its return on equity was on track with the plan.
Shares in the bank have lost 40 percent of their value since they resumed trade on the Milan bourse in late October after a 10-month suspension. In an effort to reassure investors, Chief Executive Marco Morelli and new Chief Financial Officer Andrea Rovellini flew to London last week to discuss the bank’s recovery progress. “A rise in gross lending, excluding defaulted loans, is the first sign the bank is getting back on its feet,” Morelli told shareholders. He also said funding from clients was increasing despite the fact the bank was now offering lower interest rates. “Direct funding is up. The trend observed in 2017 is continuing, with lower costs and at a slower pace.” Monte dei Paschi added 11 billion euros in client deposits in 2017, following a 15 billion euro decline in direct funding the year before.