UPDATE 1-Veneto Banca plans 500 mln euro share sale

Wed Mar 26, 2014 8:48am EDT

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By Valentina Za

MILAN, March 26 (Reuters) - Veneto Banca plans to raise 500 million euros ($687 million) by selling new shares to investors to strengthen its balance sheet after higher loan-loss provisions contributed to a 96 million euro net loss last year, the Italian mid-sized bank said.

Unlisted Veneto Banca is one of 15 Italian banks under review by the European Central Bank as part of a check-up of banking assets across the euro zone this year. Eight of them are now planning to raise fresh capital for a total of around 8 billion euros.

Veneto Banca will also convert a 350 million euro bond into equity by the end of June to bring its highest-quality capital above a minimum threshold set by the ECB in the review.

The bank said late on Tuesday it had booked 459 million euros in writedowns last year, mainly on impaired loans.

"The good performance at the operating level was completely offset by the exceptional level of loan-loss provisions," Veneto Banca said in a statement.

Italian banks are saddled with 160 billion euros in gross bad loans as the economy shrank 9 percent during a two-year recession.

The banks' efforts to clean up their balance sheets ahead of a deadline to submit financial data to the ECB have taken a toll on some lenders' 2013 earnings.

UniCredit, Italy's biggest lender by assets, posted a record 14 billion euro loss last year due to massive writedowns.

Veneto Banca had 1.5 billion euros in net bad loans at the end of 2013, or 5.7 percent of total lending. The bank said low market interest rates had driven its net interest income down 9.7 percent from a year earlier.

UNCERTAINTIES

Italy's central bank has asked Veneto Banca to evaluate possible merger options as part of a drive to strengthen the country's fragmented banking system. But CEO Vincenzo Consoli reiterated in a newspaper interview on Wednesday the bank wanted to remain independent.

"Our industrial plan has a stand-alone perspective. We want to remain independent," he said. "But we have the ECB's asset quality review ahead of us, with its many uncertainties. We will see what happens."

Consoli said the bank's highest-quality common equity capital would rise from the present 7 percent to 10.3 percent by July boosted by the share sale and the bond conversion. The ECB has set an 8 percent threshold for lenders in the review.

Veneto Banca is also trying to sell a 71 percent stake in private banking unit Banca Intermobiliare, a deal which would add a further 0.7 percentage points to its common equity.

Consoli said four bidders, both Italian and foreign, were currently looking at the company's financial data and would decide whether to go ahead by early May.

Veneto Banca will set the price of a capital increase at a board meeting on April 8.

($1 = 0.7258 Euros) (Additional reporting by Lisa Jucca. Editing by Jane Merriman)

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