Italy's BMPS slumps on cap hike backing

MILAN: Shares in Italy's Banca Monte dei Paschi di Siena SpA fell more than 3 percent on Tuesday after its main shareholder indicated support for a capital increase.Monte dei Paschi, Italy's third-biggest bank by market value, barely cleared a European Union health check of capital ratios last year. It took up 1.9 billion euros ($2.61 billion) in government aid in 2009 but has repeatedly denied plans to raise capital.

Gabriello Mancini, chairman of Fondazione Monte dei Paschi di Siena (MPS), which holds 55 percent of the bank, was quoted in Il Sole 24 Ore business newspaper saying that the foundation was open to backing a capital hike.

"I take note that the leadership of the banking group says that there is no need (for an increase), but if there is the prospect that it is necessary, we would be available to evaluate it and to support the bank's requirements," he said.

Mancini also said the foundation would back early repayment of the government crisis-fighting aid.

Shares in Monte dei Paschi, the world's oldest bank, were down 2.5 percent at 0.90 euro at 1240 GMT. The STOXX Europe 600 banking index was up 0.84 percent.

An analyst said of Mancini's comments: "They are long awaited." He estimated that Monte dei Paschi needed 2.6 billion euros to raise its Core Tier 1 ratio to 8 percent under Basel III criteria, a standard of capital held against risky assets.Of that 2.6 billion euros, 1 billion to 1.2 billion euros could come from a capital increase and the rest from disposal of assets, the analyst said.

A second analyst said politically connected shareholder foundations like Monte dei Paschi's generally opposed capital increases at banks since they are short of cash. The Tuscan city of Siena and its province control the MPS foundation.

"When one of them (foundations) says it will back a capital increase, people sell on the back of this," he said.

Along with other Italian banks, Monte dei Paschi has had a strong run since mid-January, leading investors to take profits, analysts said. Monte dei Paschi is up about 12 percent since Jan. 11, almost twice the rise in the sector index.