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Bloomberg
Banca Monte dei Paschi di Siena SpA rode lower costs and an asset sale to a second straight quarter of profit, even though a sharp drop in the value of Italian state debt hit revenue and eroded capital.
Second-quarter net income totalled $117 million, the Siena, Italy based bank said in a statement, confirming progress toward a turnaround after its Italian state rescue.
“Monte Paschi unveiled a positive set of operating results, unfortunately penalised by a negative trading line related to mark-to market of Italian government bonds,†Fabrizio Bernardian analyst at Fidentiis equities wrote in a note.
Chief Executive Officer Marco Morelli is seeking to restore the lender to long-term profitability by cutting jobs and branches and improving asset quality.
In the second quarter Morelli up two years of negotiations to take 24 billion euros of non-performing loans off its books, the biggest disposal of European soured debt to date.
The transaction is helping bolster confidence in the bank’s ability to tackle its legacy of bad debt. Monte Paschi, undermined by souring loans and derivatives deals that backfired, requested state aid last year.
The Italian government stepped in to take a stake of about 68 percent stake, injecting 5.4 billion euros in aid as part of an 8.3 billion-euro recapitalisation.
Monte Paschi reversed earlier gains of as much as 3.5 percent and was down 1.9 percent at 2.43 euros in Milan trading, giving the bank a market value of 2.76 billion euros. The stock has declined 39 percent this year.
While the increased trust in the bank has boosted deposits, a selloff on Italian government bonds in the second part of quarter hit the bank’s capital buffer.
The common equity Tier 1 ratio, a measure of financial strength, declined to 13 percent as of June 30 from 14.4 percent at the end of March.
As with the previous quarter, the results show that Monte Paschi still has a long way to go in terms of generating income.
Total revenue fell on a decline in lending and fees, and a trading loss due to “the negative effects related to the spread trend between BTP
and Bund.†Revenue missed the 860 million euro estimate of four analysts surveyed by Bloomberg.