MILAN, June 26 Ratings agency Moody's has
upgraded its long-term rating on Banca Monte dei Paschi di Siena
to 'B1' from 'B2', saying the bank's ongoing 5 billion
euro rights issue would strengthen its capital against poor
asset quality and losses.
The bailed-out Italian bank launched the highly dilutive
share sale on June 9, seeking to repay state aid and bolster its
finances in preparation for a pan-European review of banks.
The recapitalisation, which has caused high price volatility
in the company's securities, is due to end Friday.
The fully underwritten cash call "has strengthened the
bank's capital buffer against the pressures from ongoing very
poor asset quality and net losses expected for 2014 and
potentially also 2015," Moody's said in a statement.
The outlook on the bank's senior ratings remains negative.
Moody's said it expected another loss for Monte Paschi in
2014 while its 2015 net profit target of 200 million euros would
be hard to achieve due to ongoing loan loss provisioning costs.
The Tuscan lender, the world's oldest, set aside 2.75
billion euros for bad debts in 2013, and its coverage ratio of
impaired loans stands at a lowly 42 percent, a level which
analysts say is likely to fall short of ECB requirements.
Monte dei Paschi has pledged to pay back this year 3 billion
euros of 4.1 billion euros in state aid it received, with the
rest due by 2017.
Moody's also said Monte Paschi's financial fundamentals were
still vulnerable and despite the rights issue the bank was still
exposed to the EBA's stress test.
In the prospectus for the cash call, Monte Paschi said the
issue may not be enough to bolster its balance sheet if EU
regulators force it to set aside more cash to cover bad loans.
(Reporting by Danilo Masoni, editing by David Evans)