MILAN (Reuters) - Ratings agency Fitch on Friday confirmed Italy’s Monte dei Paschi di Siena’s (BMPS.MI) “BBB” credit rating with outlook stable, citing prospects of continued public support for the scandal-hit bank.
The Siena-based bank is in a crisis over an opaque series of derivatives and structured finance contracts that have left it facing losses of 720 million euros and dependent on a 3.9 billion euro ($5.3 billion) state lifeline.
“The affirmation ... reflects Fitch’s view that there is a high probability that the Italian authorities will provide continued support to MPS,” the agency said in a statement.
Last week, a special shareholder meeting approved two capital increases of up to 6.5 billion euros to be carried out if needed in the next five year.
The capital increases would allow the bank to issue shares to the treasury if it cannot pay interest on the bonds it is selling to the government as part of the state bailout.
Fitch also put its ‘B’ viability rating (VR) - a measure of financial strength - on credit watch negative, citing a possibility of further losses on the bank’s asset portfolio.
The agency said it expected the bank’s performance to remain weak, with profitability under pressure and asset quality deteriorating further amid a prolonged recession in Italy.
The case of Monte Paschi, the world’s oldest bank, is the subject of a criminal investigation by prosecutors in Siena, the Tuscan town where the bank has been based since it was founded in 1472.
The bank suffered a further blow on Thursday when Standard & Poor’s cut its long-term rating deeper into “junk” territory.
Reporting by Antonella Ciancio; Editing by David Holmes