MILAN, April 18 (Reuters) – Italy’s Monte dei Paschi (MPS) (BMPS.MI) expects an impact of around 4 billion euros ($4.4 billion) on risk-weighted assets(RWA) from its new assessment models, according to the bank’s management answers to shareholders released on Tuesday.
The document, made available before a meeting of shareholders on Thursday, showed MPS last month received a green light from the European Central Bank to adopt the new models which the bank uses to evaluate risks on large corporate loans.
The estimate, based on RWA figures as of the end of 2022, compares with a 5.6-billion-euro hit previously forecast under the Tuscan lender’s latest business plan released last June.
MPS said in its answers — on the back of a 2.5 billion euro capital raising last November — the bank currently has one of the highest capitalisation levels in the sector and is on track to hit its target of over 700 million euros in profits in 2024.
Such a scenario allows MPS “to look at any opportunities that may arise as part of the consolidation of the Italian banking sector”, it added.
Amid a upbeat market session for banks, shares in MPS rose as much as 5.7% as investors bet on potential M&A deals in the sector, a Milan-based trader said.
By 1523 GMT, the stock was outperforming a 0.7% uptick in Milan’s blue chip index (.FTMIB).
Shareholders will convene on Thursday to appoint the bank’s new board. Italy’s Treasury, which owns 64% of MPS following a 2017 bailout, said it would confirm Luigi Lovaglio at the helm of the bank as turmoil shakes the industry.
Braving turbulent markets, he steered MPS through the make-or-break capital hike, proceeding to use part of the cash to fund thousands of staff exits he agreed with unions to cut operating costs.
The veteran banker will now work to seal a merger to cement the bank’s turnaround and allow the state to meet European Union re-privatisation commitments made at the time of the bailout, a person with knowledge of the matter said.
Image by: REUTERS / Jennifer Lorenzini