* First board meeting since bank had to delay cash call
* Chairman, CEO did not go through with threat to quit
* Capital hike now seen in June
By Silvia Ognibene and Silvia Aloisi
SIENA/MILAN, Jan 14 Monte dei Paschi di Siena's
chairman and CEO will stay on in their jobs even
though they were forced to delay a vital $4 billion share sale
planned for this month, which is now not expected until
Chairman Alessandro Profumo and Chief Executive Fabrizio
Viola had both threatened to resign last month after their
proposal to launch the share issue immediately was voted down by
the bank's largest shareholder, the Fondazione Monte dei Paschi.
A source with direct knowledge of the matter said the two
had decided to remain in their jobs. "Yes," the source said when
asked after the end of the bank's board meeting on Tuesday if
they would both stay on.
The success of the share sale, which bankers now expect to
be launched in June, is a key condition set by the European
Commission for approving a 4.1 billion euros state bailout that
Monte dei Paschi received last year.
Italy's handling of Monte dei Paschi's problems is regarded
as a test of the country's ability to deal with its weaker banks
in the run-up to a health check-up of the sector by the European
The clash between Monte dei Paschi's management and its
biggest shareholder, a not-for-profit foundation with close ties
to local politicians, highlights flaws in the ownership
structure of Italy's banks and does not bode well for efforts to
strengthen them. Foundations like Monte dei Paschi's are big
shareholders in all of Italy's main banks.
Last month, the foundation voted to put off until mid-May at
the earliest the 3-billion euro ($4 billion) share sale which
Italy's third largest bank needs to pay back state aid and avert
Profumo and Viola said at the time the postponement created
uncertainty and could put at risk the bank's recovery.
Italian newspapers have said that Economy Minister Fabrizio
Saccomanni, worried about the fate of the Tuscan lender, had
asked both managers to remain in their jobs to complete its
Profumo, a former chief executive of UniCredit,
and Viola are among Italy's most respected bankers. Their
departure in the middle of the bank's turnaround plan would have
been a serious blow to its hopes to pull off the share sale,
which is bigger than the bank's 2.1 billion euro market value.
"Their staying on ... is positive not just for Monte dei
Paschi but also for the Italian banking system as a whole,"
Lando Maria Sileoni, head of the largest banking trade union
One of the first tasks for the CEO and chairman now will be
to renegotiate a preliminary accord with a consortium of banks
that had agreed to underwrite the capital increase if it was
launched by end-January.
They will also watch closely negotiations between the bank's
largest shareholder and potential buyers of its 33.5 percent
stake. The foundation delayed the share sale to give it more
time to sell down its holding to pay back 340 million euros in
Monte dei Paschi said in a statement after the board meeting
it hoped the foundation would sell its stake as quickly as
It also held open the door to possible legal action against
the foundation, saying the board would look into the possible
negative consequences of the share sale delay from a legal point
of view. The bank has already said the delay will cost it at
least 120 million euros ($164.25 million) in interest payments
on the state aid.
According to three bankers familiar with the issue, the
foundation is in talks with other banking foundations and
private equity and hedge funds, including Blackstone and
possibly Elliott Management Corp. At the same time the
foundation is also selling small portions of its stake on the
market, according to another source familiar with the matter.
The foundation declined to comment.