MILAN Credito Valtellinese (PCVI.MI) plans to raise up to 400 million euros in cash from investors by mid-2014, joining a growing list of Italian banks seeking to strengthen their balance sheets as they come under scrutiny in a sector health check.
The mid-tier bank said on Tuesday the rights issue would bring its best-quality capital to 10.9 percent, above a minimum threshold of 8 percent set by the European Central Bank for lenders it is reviewing across the euro zone.
Credito Valtellinese is one of 15 Italian banks targeted by the ECB's check up.
Seven of them are now planning to raise fresh capital for a total of more than 7.5 billion euros ($10 billion). As recently as Saturday Banca Popolare di Sondrio (BPSI.MI) said it would tap investors for up to 350 million euros.
"A stronger capital allows us to look upon the whole ECB's asset-quality review with greater tranquility," Credito Valtellinese's Chief Executive Miro Fiordi told analysts during a conference call.
"The ECB's comprehensive assessment and stress-tests are the No.1 priority in 2014."
Fiordi said that once it cleared that hurdle the bank might use its capital buffer to boost lending as the Italian economy recovers, or absorb the hit from further writedowns on bad loans it would then try to sell.
"Let's see what resources are left once we've crossed that river, hopefully many," he said.
Mediobanca, Banca IMI (ISP.MI) and Credit Suisse (CSGN.VX) are guaranteeing the cash call, and the bank is also in advanced talks to sell 40 million euros in non-performing loans, Fiordi said.
That compares with a total of 2.7 billion euros in problematic loans at the end of last year net of writedowns, the bank said on Tuesday, as it reported a net profit of 11.7 million euros for 2013.
Italian banks are struggling to get rid of bad loans as market prices for these assets are below their book value and further writedowns would be necessary to be able to sell them.
Credito Valtellinese is in talks with Mediobanca (MDBI.MI) about the investment bank's project to help groups of smaller banks offload bad debts by setting up one or more special vehicles.
Separately on Tuesday, unlisted Veneto Banca, which is also under ECB scrutiny, said its board had discussed capital-strengthening options and would unveil any decision after publishing full-year results on March 18.
Sources had told Reuters earlier on Tuesday Veneto Banca was weighing options to boost its capital, including a possible rights issue, as it strives to meet a 9.5 percent target for its common equity capital by mid-2014 from 7.2 percent at the end of 2013.
($1 = 0.7277 euros)
(Additional reporting by Andrea Mandala and Silvia Aloisi, editing by William Hardy)