Italy in talks with EU to delay MPS privatization beyond 2023 – sources

The entrance to the Monte dei Paschi di Siena bank headquarters is seen in downtown Siena, August 16, 2014. REUTERS / Stefano Rellandini

ROME, December 1 (Reuters) – Italy’s Treasury is discussing with European Union authorities the possibility of extending the 2021 deadline by more than two years to reduce Rome’s 64% stake in ailing bank Monte dei Paschi di Siena (MPS) (BMPS.MI), two sources told Reuters.

Under a € 5.4 billion ($ 6.12 billion) state bailout agreed with Brussels in 2017, Italy was expected to strike a deal by the end of this year to reprivatize MPS, but this was not possible.

Talks to sell the Tuscan lender to the country’s No.2 bank UniCredit (CRDI.MI) collapsed in October, leaving the Treasury to search for alternative options. Read more

Rome is hoping to get approval from Brussels for a long extension of the deadline for the MPS to return to private hands. This will give the government time to increase the bank’s profitability and attract new investors, the sources said, asking not to be named due to the sensitivity of the matter.

The requested extension will be “for more than two years,” said one of the sources. This was confirmed by a second source familiar with the matter.

MPS shares jumped nearly 17% on Wednesday, with traders saying the Treasury-led restructuring could make the lender more attractive to a potential partner.

On Wednesday, the rating agency Fitch removed the negative watch from the bank’s rating.

Both sources said the Treasury will do everything possible to keep the new deadline confidential, to avoid the risk that potential buyers will wait until it looms to place a bid when the government is under pressure.

However, the extension will largely cover the timeline of MPS ‘new industrial plan ending in 2025, provided EU competition authorities allow it.

The Treasury must first meet the bank’s capital needs, which MPS has estimated at 2.5 billion euros.

Reuters reported in October that the cash appeal could total $ 3.5 billion – to cover layoff costs and other expenses – or more than 3.5 times the bank’s current market value.

Rome will also implement some of the measures offered to UniCredit as part of a stand-alone solution for MPS, the sources said.

The plan will wipe the bank of its residual debt, which will go to the state-owned bad debt manager, AMCO, while state agency Fintecna will assume the risks associated with MPS’s pending lawsuits.

($ 1 = € 0.8839)

Editing by Gavin Jones

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