Home New loan Monte dei Paschi taps more banks for cash call as legal risks rise

Monte dei Paschi taps more banks for cash call as legal risks rise

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The logo of Monte dei Paschi di Siena bank is seen at the entrance of a bank in Rome, Italy August 16, 2018. REUTERS/Max Rossi/File Photo

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MILAN, Aug 5 (Reuters) – Italy’s state-owned bank Monte dei Paschi di Siena (MPS) (BMPS.MI) said four other banks had agreed to back its next 2.5 billion euro cash call (2 $.6 billion), as it moves on to fend off another legal challenge.

Burdened with a mountain of legal risk after decades of mismanagement, MPS was on the verge of drawing a line under its legal woes after an Italian appeals court in May acquitted all defendants in a major derivatives case. , bodes well for other pending lawsuits that could flow claims.

A year ago, MPS also reached a historic agreement with its former main shareholder which freed it from almost 4 billion euros in out-of-court claims.

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However, the bank said on Friday it had received out-of-court claims worth 2.6 billion euros between June and August from a consultancy firm, resulting in 78 million euros in provisions for legal risks.

Showing his first earnings as CEO, former UniCredit executive Luigi Lovaglio told analysts that the latest claims were not sufficiently supported by documents and that the bank had hired lawyers to protect its interests.

MPS also said Barclays, Santander, Societe Generale and Stifel joined BofA, Citi, Credit Suisse and Mediobanca in signing a preliminary agreement to collect all unsold shares on the cash call.

Despite the new legal risk provisions, MPS reported a net profit of 17.5 million euros ($18 million) in the second quarter after loan writedowns needed to facilitate divestitures.

Net profit increased from 9.7 million euros in the first quarter, helped by higher interest rates which more than offset lower net commissions in difficult markets and a much lower revenue contribution of negotiation.

MPS said it had agreed to sell bad loans worth 900 million euros, which allowed it to reduce the share of problem debt in total loans to 3.9%.

The reduction in bad debts is among new restructuring commitments that Italy agreed this week with the European Commission when it secured an extension to the original end-2021 deadline to reprivatize MPS.

The Tuscan bank said it expected the European Central Bank to approve its proposed capital increase in time for a shareholder vote on the new share sale on September 15.

($1 = 0.9777 euros)

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Reporting by Valentina Za; edited by Agnieszka Flak and Christina Fincher

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