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CORRECTED-UPDATE 1-Banco Popolare, Popolare Milano troubles put Italy banks in focus
January 24, 2014 / 10:18 PM / 4 years ago

CORRECTED-UPDATE 1-Banco Popolare, Popolare Milano troubles put Italy banks in focus

(Corrects name of bank raising 1.5 bln euros in paragraph 3)

By Francesca Landini and Lisa Jucca

MILAN, Jan 24 (Reuters) - Two Italian mid-sized lenders came under the spotlight on Friday as Banco Popolare announced it would need a capital increase and Banca Popolare di Milano’s top investor sold his stake in the bank.

The announcements highlight the fragility of the country’s second-tier banks, some of which are grappling with soaring bad loans as an Italian economic crisis hits small and medium enterprises.

Banco Popolare said its board had approved a capital increase worth up to 1.5 billion euros ($2.1 billion), adding it had cut its outlook on 2013 results.

The Verona-based lender said it expected to post a net loss of 600 million euros in 2013 mainly due to a surge in loan loss provisions as the bank applied the European Banking Authority’s new accounting rules.

Banco Popolare’s announcement comes as troubled lender Monte dei Paschi di Siena readies its 3-bln-euros rights issue.

Italian top bankers expect more banks to have to resort to capital increases as the European Central Bank pushes ahead with an asset quality review.

Banco Popolare’s cash call will enable the bank to boost the group’s capital base, it said in a statement. It will also help the lender redeem a soft mandatory convertible bond worth one billion euros next March.

Both Banco Popolare and Banca Popolare di Milano are cooperative lenders. This ownership structure can limit shareholders control of top managers, the Bank of Italy said last year, asking for a reform of this type of bank.

Pop Milano’s top investor Andrea Bonomi, who spearheaded a plan to turn the cooperative bank into a joint-stock company, has sold his 8.6 stake on the market, a source close to the matter said on Friday.

Bonomi, a private equity investor, wanted to change the ownership structure of the lender but his plan was shelved at the end of last year because of strong opposition by trade unions.

Like Banco Popolare, Banca Popolare di Milano also needs to boost its capital base with a 500 million euro capital increase to be carried on later this year.

“For sure some banks will need some additional capital,” Federico Ghizzoni, head of Italy’s top lender UniCredit said on Friday in an interview with Reuters TV, when asked about the health of local mid-sized banks. ($1 = 0.7307 euros) (Francesca Landini)

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