April 2, 2013 / 9:57 AM / 5 years ago

UPDATE 1-Monte Paschi shares plunge on 2012 results

* Shares shed 10 percent after wider-than-expected 2012 loss

* Bad loans rising; capital base weak (Adds analyst comments)

MILAN, April 2 (Reuters) - Shares in Banca Monte dei Paschi di Siena plunged on Tuesday after Italy’s third biggest lender reported rising bad loans and a weak capital base.

In the first day of trading since the lender published 2012 results late on Thursday, the stock was repeatedly suspended for excessive losses.

It shed nearly 10 percent by 0918 GMT at 0.17 euros, its lowest level since August last year, and was the biggest loser in Italy’s blue-chip FTSE MIB index.

The Tuscan bank posted a wider-than-expected 3.2 billion euro ($4.1 billion) loss last year due to higher loan loss charges and losses on risky derivatives trades carried out under its previous management.

The lender, which received a 4 billion euro state bailout in February, also reported a stock of gross problematic loans at 29.5 billion euros at the end of last year, up 1.3 billion euros from end-September.

Analysts said that stripping out the impact of state aid, its core Tier 1 ratio - a key measure of financial strength - came in at just 6.9 percent - well below the 9 percent minimum level required by European regulators.

“Based on the underlying numbers at this stage, MPS is structurally loss-making,” said Alberto Cordara at Bank of America-Merrill Lynch in a note on Tuesday.

“We are unclear on how MPS can repay the state aid without forcing its shareholders through capital initiatives involving potentially significant dilution.”

From this year, if Monte dei Paschi does not make enough profit to pay interest in cash on the 4 billion euros of bonds it issued to the Italian treasury, it will have to issue shares to the treasury for an equivalent amount - paving the way for partial nationalisation.

Adding to the negative sentiment, the bank also said in a document posted on its website late on Friday that customers’ deposits had fallen by “a few billion euros” after a scandal over the derivatives trades erupted in late January.

Those trades, carried out in 2006-09, are at the heart of a fraud investigation by prosecutors in Siena. (Reporting By Silvia Aloisi; Editing by Lisa Jucca and Louise Heavens)

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