MILAN May 26 Banco Popolare, Italy's
fourth-biggest bank by branches, is considering issuing a hybrid
bond to bolster its capital base, two sources familiar with the
matter said on Monday.
The mid-sized lender is one of 15 Italian banks currently
under scrutiny by the European Central Bank (ECB) in a health
check of the sector across the euro zone.
Last month it successfully completed a 1.5 billion euro ($2
bln) share sale to boost its financial strength in preparation
for the European asset review, but is still grappling with one
of the highest levels of soured loans among Italy's banks.
The sources said the bank was studying the possibility of
issuing a so-called Additional Tier 1 bond. Such bonds inflict
losses on their holders if a bank runs into difficulties and
therefore count towards its regulatory capital.
"This is something Banco Popolare is looking into with help
from some investment banks but a deal of this kind would require
some time," one source said.
A second source confirmed a possible Additional Tier 1 issue
was being considered, adding no decision had been taken.
A spokesman for Banco Popolare said the lender was not
currently planning any debt issue.
UniCredit, Italy's biggest bank by assets, is the
only Italian lender to have issued a hybrid bond of this kind,
having raised $1.25 billion in late March through a perpetual
Additional Tier 1 bond.
Banco Popolare posted a surprise first-quarter loss, after a
606 million euro full-year net loss for 2013, as it continued to
write down bad loans in an effort to clean up its balance sheet.
Analysts have noted that loan writedowns at the bank
totalled around 1.3 billion euros between the last quarter of
2013 and the first quarter of the year - almost the equivalent
of April's rights issue. At the end of March, gross impaired
loans as a percentage of total loans stood at 21.6 percent, one
of the highest in Italy.
However, Banco Popolare said its best-quality Common Equity
Tier 1 capital stood at 11.2 percent of risk-weighted assets
after the share sale, well above the ECB's 8 percent threshold
for banks in the review.
The Financial Times reported on Monday Banco Popolare was
looking at issuing its first contingent capital bond later this
($1 = 0.7336 Euros)
(Reporting by Giulio Piovaccari and Valentina Za; Editing by