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Monte Dei Paschi Announces Loss for 2012

March 28, 2013 by Leave a Comment

ROME — The ailing lender Monte dei Paschi di Siena said Thursday that it had lost nearly €3.2 billion in 2012, an improvement from the €4.7 billion it lost in 2011, but still worse than analysts had expected.

The bank blamed a difficult Italian economy, as well as its own internal problems, which its new managers described as graver than they had anticipated.

The loss for 2012, equal to $4.1 billion, compares with an average estimate for a loss of €2.5 billion in a Reuters poll of eight banks and brokerages.

The Tuscan bank, hit by a trading and bad-loan scandal, said that in 2012 it set aside about €2.7 billion to cover possible loan losses. The bank also booked a pretax loss of €730 million as it restated the value of derivatives deals that are at the center of the scandal that has engulfed an institution founded in 1472.

But the bank said it had a solid portfolio of assets and its new chief executive said the financial results were, unlike past reports, a model of transparency.

“This balance sheet is a turning point and reports a bank that is very different from the recent past,” the chief executive, Fabrizio Viola, told investors in a conference call, adding that the new management’s review of the bank’s finances were complete and that there were no more unwelcome surprises lurking in the books.

The bank said revenue for 2012 declined 6.2 percent from the year before, due in part to a steep fall in net interest income and a slip in fees and commissions.

Mr. Viola said the bank had reduced its operations by 11 percent, taking a one-off charge of €311 million for the restructuring.

The lender, based in Siena, has been at the center of a financial and political storm since January, when it emerged that Mr. Viola, appointed as the chief executive in 2012, had found a suspect exchange of letters between Monte dei Paschi and Nomura, an investment bank, hidden in a safe. The following month, the bank disclosed losses of €730 million related to three structured product transactions, one of which was with Nomura.

The transactions came under scrutiny by prosecutors in Siena, who had opened an investigation into the lender’s financial troubles and the alleged bribes that brought the world’s oldest operating bank to its knees and led it to request a €4.1 billion bailout from the Italian government. In their latest action, magistrates this week directed financial police to search Nomura’s offices in Milan for documents related to one of the suspect transactions.

Monte dei Paschi has begun legal action to retrieve some of the losses and sued Deutsche Bank and Nomura, as well as two former executives of the Siena bank, over two of the financial transactions that were responsible for most of the losses.

The bank’s current management decided to sue the former chief executive, Antonio Vigni, over the so-called Santorini trade, a transaction with Deutsche Bank in 2008 that eventually resulted in a €305.2 million loss for Monte dei Paschi. It also filed a lawsuit against the bank’s former chairman, Giuseppe Mussari, for a 2009 deal with Nomura, called “Alexandria,” which resulted in losses of €273.5 million.

Monte dei Paschi’s problems began with its acquisition in 2008 of the regional lender Antonveneta for €9 billion, a price analysts say was wildly inflated. In the wake of that deal, Monte dei Paschi used transactions like “Alexandria” and “Santorini” in an attempt to raise money without eroding its capital base.

But the financial instruments were not disclosed to regulators, according to prosecutors and the Bank of Italy, the country’s central bank, and later resulted in steep losses. Some of the bank’s former executives are under investigation by the prosecutors in Siena.

As part of its efforts to rehabilitate its finances and its reputation, the bank brought in a new management team, including Mr. Viola and a new chairman, Alessandro Profumo.

The lender is also in the process of closing hundreds of branches and is cutting more than 4,000 jobs.

Article source: http://www.nytimes.com/2013/03/29/business/global/monte-dei-paschi-announces-loss-for-2012.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Draghi Says Regulators Need More Power to Supervise Local Banks

February 7, 2013 by Leave a Comment

FRANKFURT — Problems at the Italian bank Monte dei Paschi di Siena show that regulators need more power to fire incompetent managers or otherwise step in when banks get in trouble, the president of the European Central Bank said Thursday.

The remarks, by Mario Draghi, came as he defended himself against criticism that he shared the blame for losses at Monte dei Paschi, or M.P.S., a centuries-old Tuscan lender.

“The Bank of Italy has done everything it should,” said Mr. Draghi, referring to the Italian central bank, where he was governor before becoming president of the E.C.B. in late 2011.

Troubles at M.P.S. have shaken Italian politics and caused jitters around the euro zone, while raising questions about the actions of Mr. Draghi, who is otherwise seen as a savior because of his efforts to contain the euro crisis.

Questions about the Bank of Italy’s role in overseeing M.P.S. come as the E.C.B. is preparing to assume responsibility for supervising all banks in the euro zone. That shift of power to the E.C.B. is supposed to increase confidence in euro zone banks and prevent national regulators from treating their home institutions too gently.

M.P.S. said late Wednesday that its losses from three questionable transactions were €730 million, or $978 million. That was only slightly higher than an estimate in October that the losses totaled €720 million.

The bank has new management since the events in question, which occurred mostly in 2008 and after. In a conference call Thursday, the M.P.S. chief financial officer, Bernardo Mingrone, sought to put the problems behind the bank. “Those are the only three operations that we found to be troublesome in the way they were accounted for,” he said.

Problems at M.P.S., which was founded in 1472, have rippled far beyond the medieval city of Siena, whose local government is also the bank’s largest shareholder.

The former prime minister Silvio Berlusconi has seized on the scandal as an issue as he tries to make a political comeback before the Italian national elections this month.

Mr. Draghi noted that the Bank of Italy lacked powers to remove managers at M.P.S. or to pursue criminal wrongdoing. The Italian central bank referred evidence of criminal activity to prosecutors, he said.

“You should certainly discount much of what you hear and read as part of the regular noise that elections produce,” Mr. Draghi said.

The Bank of Italy has insisted that it subjected M.P.S. to intense scrutiny. Last week the central bank issued a detailed account of the numerous steps it had taken since 2008 to force M.P.S. to raise capital, pressure managers to leave and deal with risks stemming from its holdings of Italian bonds, which were declining in value.

Some managers withheld critical information about the questionable trades that came to light only recently, the Bank of Italy said.

Still, the case of M.P.S. has illustrated the limits of bank supervision in Europe and called into question whether the E.C.B. would be able to do a better job than national supervisors of keeping an eye on financial institutions.

“One of the things that this story shows is that having more powers would have helped,” Mr. Draghi said.

But he rejected suggestions that the case illustrates one of the risks of giving central banks supervisory authority for banks: that it can damage central bankers’ reputations and hurt their ability to carry out monetary policy.

The problems at M.P.S., which led to a €3.9 billion bailout by the Italian government, have also led to criminal inquiries.

Prosecutors in Siena on Wednesday heard testimony from Antonio Vigni, a former chief executive of Monte dei Paschi and one of several previous managers being investigated on a series of charges including false accounting and fraud. Giuseppe Mussari, the bank’s former president, was to testify this week.

The bank’s troubles stem in part from the €9 billion purchase of Antonveneta bank in 2008, just months after the Spanish bank Santander had bought it for €6.6 billion. The Siena magistrates are also looking into allegations of bribery related to that deal.

Investigations have branched out to other Italian cities, including Trani, in Apulia, where prosecutors are looking closely at complex financial transactions carried out by Monte dei Paschi and other Italian banks as well as the role of the regulatory bodies entrusted with monitoring those banks.

Fabrizio Viola, the bank’s chief executive, said during the conference call Thursday that retail banking was now M.P.S.’s primary purpose. “Our core business is the retail,” he said, “and we manage financial operations with the transparency needed for the bank and for the markets.”

Gaia Pianigiani from Rome. Elisabetta Povoledo contributed from Rome.

This article has been revised to reflect the following correction:

Correction: February 7, 2013

An earlier version of this article misstated the Italian region where Trani is situated. It is in Apulia, not Sicily.

Article source: http://www.nytimes.com/2013/02/08/business/global/draghi-says-regulators-need-more-power-to-supervise-local-banks.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Former Top Banker Testifies in Spain Behind Closed Doors

December 21, 2012 by Leave a Comment

Mr. Rato was called to answer accusations that he and fellow directors at the Spanish bank Bankia presented misleading accounts for the company. He testified behind closed doors for nearly three hours and did not make a public statement afterward.

Mr. Rato, the former executive chairman of Bankia, and 32 other former executives and board members were named in a criminal investigation that was ordered this year by a judge from the Spanish National Court.

Neither Mr. Rato nor the other executives have been formally charged with any crime. But prosecutors have accused Mr. Rato and the others of presenting inaccurate accounts when Bankia became a public company in July 2011.

In his court appearance, Mr. Rato denied any wrongdoing. Instead, he argued that the government and the central bank had pressured Bankia to proceed with the stock listing, according to a person with knowledge of the testimony who declined to be identified discussing confidential proceedings.

Mr. Rato, who is also a former finance minister, appeared before Parliament in July to answer similar accusations. At the time, he rejected any suggestion that he or other directors had ignored or hidden Bankia’s collection of bad loans.

The government of Prime Minister Mariano Rajoy nationalized Bankia in early May, two days after Mr. Rato resigned from the bank. A month later, after Bankia’s new management announced that the lender needed 19 billion euros, or $25 billion, in additional capital, Madrid negotiated a 100 billion euro rescue package for the country’s banking industry.

That rescue operation is still under way. On Thursday, the European Commission cleared the restructuring plans of four smaller lenders — Banco Mare Nostrum, Caja España-Caja Duero, Caja3 and Liberbank — that were also left with an unsustainable burden of bad property loans after Spain’s construction bubble burst.

The commission has been reviewing the bailouts of the ailing banks to ensure that the government aid does not distort competition in the financial industry. In connection with the reviews, the commission has demanded that the banks make significant cuts.

Spanish banks are set to receive 39 billion euros of the 100 billion euros authorized. The banks have already received 13 billion euros of Spanish government aid since 2010 to help them stay afloat.

Bankia’s stock price has dropped since its initial public offering of stock. Many other investors have also incurred losses on preference shares, a type of convertible debt that Bankia and other banks sold mainly to their retail clients. Mr. Rato was confronted on Thursday by a large group of protesters. Some of them screamed insults at him as he made his way into the courthouse.

Bankia’s collapse has had political repercussions because the lender has longstanding ties to Mr. Rajoy’s governing Popular Party. Mr. Rato was finance minister in a previous conservative administration, alongside Mr. Rajoy, who was interior minister the time.

Bankia was the product of a merger of seven cajas, or savings banks, that was engineered as part of a government-directed consolidation of the industry.

Bankia’s initial offering was been hailed in Spain as proof that the financial industry could overcome the consequences of a decade of reckless property lending. Instead, Bankia ended up reporting a loss of almost 4.5 billion euros in the first half of this year, a record for a Spanish bank.

Article source: http://www.nytimes.com/2012/12/21/business/global/former-top-banker-testifies-in-spain.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,