ROME Feb 8 Banca Popolare di Milano plans to launch a 500 million euro ($681 million) cash call by April 30, its chief executive said on Saturday, to boost its balance sheet before results are announced from a Europe-wide sector health check.
Profit-sapping loan losses have continued to afflict Italian banks even as the country's longest postwar recession began to recede at the end of last year, prompting the Bank of Italy to demand that lenders boost provisions and beef up capital before the ECB's check-up this year.
Pop Milano Chief Executive Giuseppe Castagna said his bank had a preliminary agreement with a consortium of banks to underwrite the rights issue and that accord was expiring at the end of April. The lender would need to renegotiate that deal should the cash call be launched after that date.
"We have the underwriting expiring on April 30 and we would not want to extend it," Castagna said on the sidelines of a banking event in Rome.
Italy's two largest banks Intesa Sanpaolo and UniCredit have strong core capital and neither is expected to need to raise funds in the wake of the ECB assessment this autumn.
But small and medium-sized Italian lenders are on a weaker footing. Including Pop Milano, four of the 15 Italian banks to be scrutinised by the ECB are expected to tap the market for around 6 billion euros between April and July.
Italy's No.3 bank, Monte dei Paschi di Siena, must raise 3 billion euros to repay state aid and stave off nationalisation. Fourth-largest lender Banco Popolare surprised the market last month when it said it was planning a 1.5 billion euros rights issue.
Smaller peer Banca Carige, which has a capital shortfall of 800 million euros, is likely to unveil the size of its share sale when it presents a new business plan on March 24, Chairman Cesare Castelbarco said on Saturday.
Speaking at the same event, the chief executive of UBI Banca said Italy's fifth biggest lender would not need a capital increase given that its common equity Tier 1 capital - the best-quality capital - was above 10 percent of risk-weighted assets, above an 8 percent threshold set by the ECB.
"For us it's not on the agenda," CEO Victor Messiah said.
He also added that the bank was not planning any measures to deal with non-performing loans. Both Intesa and UniCredit are in preliminary talks with U.S. investor KKR about setting up a fund to hold some of the lenders' problematic loans, two sources close to the matter said this week. ($1 = 0.7343 euros) (Reporting by Gianluca Semeraro, writing by Agnieszka Flak; Editing by Andrew Heavens)