MILAN (Reuters) - Banca Monte dei Paschi di Siena (BMPS.MI), Italy’s No.3 lender, posted a bigger than expected 4.69 billion euros ($6.2 billion)loss in 2011 after writing down billions of goodwill on past deals to clean up a balance sheet ravaged by the euro zone debt crisis.
The writedowns by the Tuscan lender, which is undergoing a radical transformation under a new management, totaled 4.51 billion euros.
They included a large impairment loss on the 9 billion euros cash acquisition of smaller peer Antonveneta in 2007, a pricey deal which stretched Monte dei Paschi’s finances to the limit right into the financial crisis.
A Thomson Reuters I/B/E/S analyst consensus had forecast a net loss of 2.13 billion euros for the year.
“Aside from the interest margins, all the rest is negative. The net commissions fell really badly and the really worrying fact is that in a single quarter customer loans fell a whole 10 billion euros,” said Fabrizio Bernardi, an analyst with Fidentiis Equities.
A spokesman for Monte dei Paschi said after the results were announced that the bank, which also reported a 1.2 percent fall in revenues, would not pay a dividend on 2011 results.
Its shares lost as much as 2 percent in early trading, but erased some of their gains in highly volatile trading and were down 0.5 percent at 0734 GMT, broadly in line with a 0.4 percent fall in the European banking index .SX7P.
The bank said its Core Tier 1 ratio stood at 8.5 percent, excluding 1.9 billion euros of state-backed bonds it took in 2009 to bolster its capital.
The Siena-based bank follows in the steps of bigger domestic banks like UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI), which have both booked massive writedowns in their 2011 accounts. Writedowns have no impact on a bank’s capital, liquidity or cash flow.
Analysts regard Monte dei Paschi, which was founded in 1472, as one of Europe’s most vulnerable because it needs to plug a 3.3 billion euros capital shortfall by June to meet tougher requirements by European regulators.
Monte Paschi said the conversion into equities of financial instruments known as Fresh would plug 1 billion euros of that gap.
Director General Fabrizio Viola, who was appointed in January and will soon become the bank’s first ever chief executive, is penning a restructuring plan based on asset disposals and staff cost cuts to revive the bank’s weak profitability and bolster its capital base.
Viola will soon be flanked by former UniCredit boss Alessandro Profumo, who will be formally appointed chairman of the lender at a shareholder meeting in April.
In addition to the revamp at the top, Monte dei Paschi also faces a shake-up of its shareholder structure. The bank’s controlling shareholder, a charitable foundation with strong ties to local politicians, is selling down its large stake to pay back big debts it ran up to keep a grip on the lender.
The Monte dei Paschi foundation has already sold an 8.2 percent stake, including 4 percent to Tuscan-based entrepreneurs, cutting its holding in the lender to around 41 percent.
It is now looking to sell another 5-7 percent in the bank to repay around 1 billion euros of debts it owes to a group of 12 creditors, including JP Morgan (JPM.N), Credit Suisse CSGN.VX and Mediobanca (MDBI.MI).
In a small consolation for the bank, the net loss for 2011 means it will not have to pay an 8.5 percent coupon on the so-called Tremonti state-backed bonds.
All Italian lenders suffered because of the euro zone debt crisis, but Monte dei Paschi was hit particularly hard because with 25 billion euros of domestic government bonds it has the largest proportional exposure to Italy’s sovereign debt among national banks.
Additional reporting by Stephen Jewkes; Editing by Mike Nesbit