MILAN Shares in Banca Monte dei Paschi di Siena (BMPS.MI) rose more than 4 percent on Monday on speculation of a possible stake sale by the bank's biggest shareholder, even though this was denied.
The charitable banking foundation that owns 33.5 percent of Italy's third-largest bank needs cash to repay 339 million euros of debt and is trying to find buyers for part or all of its stake.
But the foundation denied a report in newspaper La Repubblica that it was close to selling a 20 percent stake to three other banking foundations and a group of investors at 0.14 euros a share.
It also said that a planned meeting of its board on Monday was not going to discuss any stake sale proposal.
Monte dei Paschi's shares rose to their highest in nearly two weeks at 0.1793 euros and were up 4.13 percent by 1116 GMT in volatile trade.
"The shares are rising on speculation that other banking foundations could be involved," said one Milan-based trader. "Many investors are short on Monte Paschi and the newsflow is forcing a few funds to close their positions, whatever happens."
Shares in Monte dei Paschi have fallen by more than 20 percent in the past month, close to a record low, because of a clash between Monte dei Paschi and its biggest shareholder over the timing of a vital capital increase.
The foundation has threatened to vote against a 3 billion euro cash call planned for January at a December 27 shareholder meeting unless the bank's management agrees to push it back to May or later.
Monte dei Paschi needs to carry out the capital increase to help repay 4.1 billion euros of state aid it received earlier this year to stay in business after it was hit by the euro zone debt crisis and a derivatives scandal.
Its management, led by Chairman Alessandro Profumo and Chief Executive Fabrizio Viola, wants to tap investors for cash before an expected raft of capital increases by other European banks following a European Central Bank asset quality check-up.
The foundation fears it may not have enough time to arrange a favorable sale of all or part of its stake if the capital increase is carried out in January as planned.
($1 = 0.7315 euros)
(Reporting by Francesca Landini and Maria Pia Quaglia,; Editing by Lisa Jucca and Jane Merriman)