November 11, 2014 / 11:25 AM / 6 years ago

Monte Paschi shares boosted by BNP bid speculation

LONDON/MILAN (Reuters) - Shares in Banca Monte dei Paschi di Siena (BMPS.MI) rose as much as six percent on Tuesday, with several traders citing possible interest in the troubled Italian lender from France’s BNP Paribas (BNPP.PA) after a Reuters Breakingviews article.

The Tuscan lender’s shares have been highly volatile since a European health check showed a capital shortfall of 2.1 billion euros($2.6 billion) that the bank must plug within nine months.

The shares gained support from the commentary piece which examined the rationale for BNP making a bid.

Monte Paschi, which reports third-quarter results on Wednesday, declined to comment. BNP, which in the past has dismissed talk of interest in Monte dei Paschi as speculation, was unavailable for comment.

“The Breakingviews article says that a merger with BNP would make a lot of sense...I do find that believable,” a London-based trader said.

A Milan trader also attributed the rise in the shares to a possible bid by BNP, while a third trader said there was market talk that a “white knight” bidder might emerge.

Shares in the Italian bank plunged 40 percent in the last week of October following the outcome of the EU tests. They recovering partially after the bank announced plans to tap the market for up to 2.5 billion euros, which would allow it to also pay back state aid.

The capital increase, to be launched next year, is regarded by many bankers as a stepping stone to a tie-up with another bank. Two sources close to the situation have told Reuters the bank is looking for a buyer, with one saying UBS - which together with Citigroup is advising Monte dei Paschi on strategic options - had been given the specific mandate of looking at merger possibilities.

The entrance of Monte dei Paschi bank headquaters is pictured in downtown Siena, August 16, 2014. REUTERS/Stefano Rellandini

Besides BNP Paribas, Spain’s Santander (SAN.MC) has also been mentioned as a possible buyer but its chief executive said last week the lender was not looking at Monte dei Paschi.

Domestic rival UBI Banca (UBI.MI) has also been tipped as a possible white knight, but it has said it had “no contacts whatsoever” with the Tuscan bank.

(1 US dollar = 0.8053 euro)

Reporting by Giancarlo Navach and Stefano Rebaudo in Milan, Lionel Laurent in London and Astrid Wendlandt in Paris; writing by Silvia Aloisi; editing by Keith Weir

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