Italy sets share value for Monte Paschi

Italy will subscribe to Banca Monte dei Paschi di Siena’s capital increase at €6.49 euper share, the world’s oldest bank said after the government took final steps allowing the lender to receive state aid.

The government last week published two decrees, setting terms for a so-called precautionary recapitalisation of the bank. The Siena-based lender needs state support to survive, even though regulators have declared it solvent. Monte Paschi turned to Italy for help after it failed to raise funding from investors in December. The package to recapitalise the bank is worth €8.3 billion (Dh35.74bn).

Italy is struggling to fix a crisis-era legacy of soured loans weighing on its weak recovery, and is ploughing money into troubled lenders in an effort to revamp its banking industry and break a slump in lending.

The state plans to inject €3.9bn into Monte Paschi by buying newly-issued ordinary shares, while the remainder will be covered by swapping subordinated bonds into equity, a process known as burden sharing.

The European Commission on July 4 approved the recapitalisation after months of negotiations. After the recapitalisation the bank’s capital will exceed €15.6bn, Monte Paschi said. Shares resulting from burden sharing and the stock subscribed by the state will be admitted to trading on the Italian Stock Exchange following the publication of the Listing Prospectus.

The commission agreed to allow the state to inject the money only after shareholders and junior creditors contributed about €4.5bn to Monte Paschi’s rescue, as required by EU rules.