* Bank re-assessing cash call in light of EU health check
* Capital hike may increase to 5 bln euros - media report
* Bank aims to repay state aid this year
* Shares fall 10.4 percent
(Repeats with link to Breakingviews)
By Lisa Jucca and Stefano Bernabei
MILAN/ROME, April 15 Italy's loss-making Banca
Monte dei Paschi di Siena is considering increasing
the size of its planned share sale to help it pass a Europe-wide
bank health check and repay state aid this year.
Italian banks, struggling under a mountain of bad debt after
two years of deep recession, are aiming to boost their capital
bases to cover loan losses and meet a tough assessment of asset
quality being carried out by the European Central Bank.
Eight Italian banks including Monte dei Paschi di Siena, the
third-largest, have already announced they will seek to raise 8
billion euros ($11 billion) of additional capital over the
Monte dei Paschi, which was rescued by the government last
year, was expected to launch its fundraising late in May. But an
increase in the size of the rights issue would delay the
exercise to June or later, pushing the Tuscan bank to the back
of the queue of Italian lenders asking shareholders for money.
Late on Monday, news agency ANSA said the bank was now
looking to tap investors for up to 5 billion euros, two thirds
more than the 3 billion initially planned. Monte dei Paschi's
market value is 2.9 billion euros at the current share price.
On Tuesday, Monte dei Paschi said it was evaluating how much
capital it needed in light of the ECB's asset review and also
after discussions with Italy's banking supervisor, the Bank of
Italy. It declined to confirm whether it was aiming to raise 5
"The bank is assessing the implications in relation to the
amount of funds necessary to pay back this year's state-aid as
pledged with the European Commission," it said.
Monte Paschi had already planned to pay back this year 3
billion of the 4.1 billion euro state bailout it has received.
The Bank of Italy declined to comment.
Monte Paschi's shares fell 10.4 percent on Tuesday to 0.2248
euro in heavy volume of 1.1 billion shares, equivalent to around
9 percent of the bank's capital.
Davide Serra, the founder of hedge fund Algebris and a
former banking analyst, told Italy's Radio24 earlier this month
that Monte dei Paschi could need to raise as much as 6 billion
euros if it decided to bolster its coverage of doubtful loans in
line with bigger rivals UniCredit and Intesa Sanpaolo
These two banks set aside a combined 21 billion euros in
2013 to cover for losses, compared with 2.75 billion euros at
Monte dei Paschi.
"If you were to apply the same level of coverage of Italy's
No.1 and No. 2 bank, Monte dei Paschi would need a further 3
billion euros of capital," Serra told Radio24.
Broker Fidentiis said in a note to clients that additional
capital may be needed for the bank to further clean up its
balance sheet and to pay back all of the state aid.
The bank was bailed out last year after it suffered heavy
losses in the euro zone debt crisis and was hit by a derivatives
It was unclear what implications a larger capital increase
would have on a shareholder pact recently signed between the
Monte dei Paschi foundation, the former controlling investor,
and Latin American investors BGT Pactual and Fintech.
Together, these three investors control 9 percent of Monte
dei Paschi and have pledged to keep the same holding after the
($1 = 0.7238 Euros)
(Additional reporting by Valentina Za and Stephen Jewkes;
Editing by Erica Billingham)