(Adds cash call date, CEO quotes, shares)
MILAN, March 12 Banca Popolare di Milano (BPM)
expects the Bank of Italy to remove an additional
risk-weighting of assets it has imposed on the cooperative bank
and will not pay a dividend over the next few years if that were
not the case.
Chief Executive Giuseppe Castagna told analysts on Wednesday
there had been "intense talks" with the central bank over
governance changes, a new business plan and a rights issue - the
three elements to which the regulator had pinned the
cancellation of the so-called "add-ons".
"We believe there is a very high probability we can achieve
the removal of the add-ons," Castagna said during a conference
He said Pop Milano would not pay a dividend over the course
of its new business plan if the Bank of Italy did not allow it
to remove the add-ons.
The cooperative bank said on Tuesday it was targeting a
common equity ratio of around 12 percent in 2016 from 7.1
percent at the end of last year.
The bank said in slides posted on its website on Wednesday a
planned 500 million euros ($695 million) rights issue would add
1.3 percentage points to its best-quality capital with a further
1.8 points expected from the removal of the add-ons.
The capital increase could be launched as soon as April 28
and by May 5 at the latest, Castagna said at a later press
conference, adding that he would begin a roadshow in the coming
days to meet with potential investors.
"We have met the timeline we've committed to for the
presentation of a business plan and on governance reform," he
said. "I hope investors will appreciate our work."
BPM would consider any M&A activity only with a more solid
capital base to not become "victims" in the process, he added.
Smaller banks have borne the brunt of Italy's recession and
are being encouraged by the Bank of Italy to merge to shore up
their finances - a process which a sector-wide health check by
the European Central Bank is expected to hasten.
Castagna also said BPM could consider selling a package of
problematic loans, but only with an opportunistic view.
"We are open to everything, but with the (capital) increase
we do not need to sell assets to boost capital," Castagna said.
He also added that BPM had never been approached regarding a
project by investment bank Mediobanca that seeks to
pool the bad loans some smaller Italian lenders built up during
The stock closed up 5.28 percent at 0.65 euros,
outperforming a 0.3 percent fall in Milan's All-Share index
($1 = 0.7192 euros)
(Reporting by Valentina Za and Andrea Mandala; writing by
Valentina Za and Agnieszka Flak, editing by David Evans)