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Monte dei Paschi swings to Q2 loss from year-ago profit

Banca Monte dei Paschi di Siena SpA reported reclassified consolidated net loss of €3.07 billion for the second quarter, compared to a reclassified net profit of €208.9 million a year ago.

The Italian bank's net nonperforming loan exposure stood at approximately €15.6 billion as of June 30, down by around €4.7 billion since the beginning of 2017. Its gross NPL exposure amounted to €45.5 billion at June-end, down by €300 million at the end of 2016 and by €500 million as of March 31.

The troubled lender completed on the week of Aug. 7 an €8 billion capital increase, of which €3.85 billion was provided by the state, Reuters reported Aug. 11. The remaining amount stemmed from the mandatory conversion of subordinated bonds into shares, which included those held by Italian insurer Generali, according to the report.

The Italian government thus now holds a roughly 52.2% stake in Monte dei Paschi, the newswire noted, with Generali holding a 4.3% stake.

Under the terms of the state aid, Monte dei Paschi will off-load its €26.1 billion NPL portfolio on market terms to a privately funded vehicle, an operation to be partially financed by the Atlante II bank rescue fund.

The bank's transitional common equity Tier 1 ratio stood at 1.5% at June-end, excluding the impact of recapitalization, compared to 8.2% at the end of 2016. Including the capital increase, the transitional CET1 ratio was 15.4%.

Net interest income for the quarter decreased year over year to €445.9 million from €486.9 million. Net fee and commission income declined over the same period to €431.2 million from €483.8 million.

Net impairment reversals amounted to €4.37 billion, compared to €368.0 million in the second quarter of 2016. Net provisions for risks and charges reached €13.4 million, compared to net reversals of €29.2 million a year earlier.

Gains on investments were flat year over year at approximately €200,000. Monte dei Paschi booked deferred tax asset fees of €17.5 million, compared to €108.8 million a year ago.

For the first half, Monte dei Paschi posted a reclassified consolidated net loss of €3.24 billion, compared to a net profit of €302.0 million in the same period in 2016. Pre-provision profit dropped on a yearly basis to €586.0 million from €1.07 billion.

Net impairment losses on loans, financial assets and other operations was about €4.68 billion for the first half, up by €3.96 billion compared to a year ago. The bank said this was primarily attributable to provisions on loans subject to securitization after the review of their realizable value, including additional costs provided for in the agreement with Quaestio, which overall amounted to around €4 billion, as well as the devaluation of the stake held in Atlante, which was a negative of about €30 million.

The bank's total capital ratio stood at 2.8% as of June 30, compared to 10.4% as of Dec. 31, 2016. The transitional leverage ratio decreased to 0.6% at June-end from 3.2% at the end of 2016.