By Francesca Landini and Stefano Bernabei
MILAN, Jan 20 Some Monte dei Paschi customers have been pulling savings out of the Italian bank, its chief executive said on Wednesday, as it faces a crisis over a mountain of bad loans that has wiped nearly 60 percent off its market value this year.
CEO Fabrizio Viola did not say how much money savers had withdrawn, or when the outflow began, though he said the fall in deposits was “limited” and that the bank could cope with it as he sought to reassure customers and investors.
Italian bank shares have lost 24 percent since the beginning of 2016 as investors, already rattled about global economic growth, have sold out of a sector with low profitability and about 200 billion euros ($218 billion) of loans that are unlikely to be repaid.
Monte Paschi – Italy’s third-biggest bank – has lost the most ground as it is perceived to be the most vulnerable; it has the highest level of bad loans as a proportion of assets and was the worst performer in a 2014 health check of euro zone lenders.
The Tuscan-based bank’s stock, which had sunk 15 percent on Monday and 14 percent on Tuesday, was suspended from trading several times on Wednesday before closing down 22.2 percent. Fears of contagion from Monte dei Paschi’s crisis helped drag down other Italian banking stocks, with Carige and Banco Popolare shedding 18 and 11 percent respectively.
“Of course clients turning to our local branches are worried about what they read,” Viola said in a statement.
“At present the size of the funding lost due to clients who decided to move part of their savings elsewhere is limited and anyway below levels seen during the previous crisis the bank faced in February 2013 which was overcome brilliantly.”
The 2013 crisis he was referring to was when the world’s oldest bank, already badly hurt by the euro zone debt crisis, was hit by a scandal about loss-making derivatives trades.
Monte Paschi’s bonds also suffered on Wednesday, with a September 2020 subordinated paper at one stage yielding 24 percent, up from 19 percent at Tuesday’s close and just above 10 percent on Friday.
A Milan bond trader said both retail and some institutional investors were trying to sell the bank’s debt. “Everyone is trying to get out. Retail for sure but I saw also a couple of fund managers today,” the trader said.[button link=”http://www.reuters.com/article/monte-paschi-ceo-statement-idUSL8N1540SI” color=”default”]Continue Reading →[/button]