World's oldest bank shaken by $6.2B loss
MILAN - March 29, 2012 (WPVI) -- Shares in Monte dei Paschi di Siena, the world's oldest running bank, plunged by nearly 11 percent on Thursday after it posted a massive loss of ¬4.7 billion ($6.2 billion) in 2011.
The Italian bank, which was founded during the Renaissance in 1472, said the losses were mainly due to charges taken to deal with the impact of Europe's debt crisis and the economic slowdown. It wrote down the value of its assets by ¬4.51 billion, including ¬1.3 billion in bad loans.
Because the write-down is an accounting move, it will have no impact on cash-flow, liquidity, or future earnings potential, the bank claimed.
Investors were nevertheless shaken, sending shares in the company 11 percent lower to close at ¬0.32.
The bank's foundation, a nonprofit organization that holds a controlling stake in the financial firm, has proposed that former UniCredit CEO Alessandro Profumo take over as chairman. Profumo lost his post at UniCredit in 2010, amid an uproar over Libyan authorities' acquisition of an increased stake in the bank, Italy's largest by assets.
Director general Fabrizio Viola said the appointment would be "a signal of the bank's relaunching."
Monte dei Paschi management planned to meet with unions on Friday to discuss measures to cut costs for 31,000 employees by some ¬80 million. The bank has said it would try not to cut jobs, having already cut salaries for top managers.
It said the talks would focus on the impact of Premier Mario Monti's pension reforms, which postpones the retirement of some 800 bank employees.
The bank has been under pressure since the European Banking Authority demanded it raise ¬3.2 billion ($4.26 billion) by June. It has refused to raise capital, instead seeking to plug the gap by selling real estate and other measures.
The Core Tier 1 ratio, a measure of a bank's health, stood at 8.5 percent at the end of last year. The EBA had demanded that it reach 9 percent by the middle of the year.
Viola on Thursday reiterated that a capital increase was out of the question. "We are doing everything possible to reach the goal."
Monte dei Paschi, often referred to informally as Montepaschi, is working on a new business plan, which it plans to announce in the coming months. Viola said it should be ready for board approval in May.
"The revisitation of the industrial plan for the short and the long-term foresees the bank as a standalone, as it has been until today," Viola said.
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