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Monte dei Paschi: baptism of fire for new CEO?

Wednesday, September 14, 2016 - 01:45

Italy's Monte dei Paschi di Siena appoints Marco Morelli as its new chief executive, handing the 54-year-old banker the job of convincing investors to back a third cash call for the ailing bank in as many years. David Pollard reports.

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As a one-time CFO with Monte dei Paschi, Marco Morelli may be betting on a warm welcome when he joins as its new chief exec. So warm some are already branding it a baptism of fire. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "The bigger question is not why anybody would want to take on the Monte dei Paschi CEO job, why would anyone want to invest in Monte dei Paschi full stop. They are looking for a 5 billion euro cash call. The bank is still sitting on 45 billion euros of non-performing loans." The heat may have been too much for the man he's replacing. Fabrizio Viola stepping down last week. Morelli comes to the job as head of Bank of America Merrill Lynch in Italy. But he may struggle to get investors behind a third share sale in three years - or to sell on a planned 28 billion euros of loans. He could look to the Italian Treasury for support - it's the bank's biggest shareholder. Though with Italy groaning under 360 billion euros of bad debts - Monte - the weakest lender in this year's industry stress tests - is not the only one in the hot seat. Nor is Italy itself. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "If you look at the overall number of non-performing loans in Italy, that accounts for 17 per cent of overall loans. But if you look at countries like Greece and Cyprus, the numbers are up around 45, 49 per cent ... It's going to be very, very difficult for the European economy until such times as the European regulators sort out the banking system." And even the Monte share sale could be postponed until after Italy's constitutional referendum later this year. Prime minister Matteo Renzi worried, possibly, about political uncertainty. After an 81 per cent slide in its share price already this year, an option that could mean even more uncertainty for the bank itself.