Tensions rise at Monte Paschi ahead of meeting to decide on capital injection

Tensions at troubled Monte dei Paschi di Siena grew yesterday with sources saying chairman Alessandro Profumo may resign if the Italian bank’s top investor defies his wishes by delaying a vital €3 billion capital injection.

The world’s oldest bank was forced to accept €4.1 billion of state aid earlier this year after being badly hit by the euro zone debt crisis and loss-making derivatives trades.

The Tuscan bank needs a cash call to repay the state aid and avert nationalisation. Mr Profumo and chief executive Fabrizio Viola want to launch it in January and have asked shareholders to approve this timeframe this week.

They have already secured a pool of banks ready to guarantee the rights issue and would like to carry it out quickly to remove uncertainty and avoid a string of cash calls by other European lenders that might make fundraising harder.

However, the biggest shareholder – a cash-strapped not-for-profit foundation with close ties to politicians in Siena – is determined to push back the cash call to mid-2014 to win more time to sell down its 33.5 per cent stake and repay debt.

Meeting abandoned
A shareholder meeting due to take place yesterday had to be reconvened for today as only 49.3 per cent of investors showed up, below the required legal threshold of 50 per cent plus one.

Today the quorum will be lowered to one third of shareholders, allowing the foundation to easily postpone the capital increase.

Aides and bankers close to the situation said Mr Profumo, a strong-willed, internationally respected banker, could resign if the foundation votes against his proposal for a January cash call today as expected.

The bank, which is axing 8,000 jobs and shutting 550 branches, said a delay in the cash call would add €120 million of costs from interest payments on the state debt. –(Reuters)