Monte dei Paschi contacts banks to back five billion euro cash call

July 27, 2016 08:42 AM

Banca Monte dei Paschi di Siena has asked at least eight banks to guarantee a five billion euro ($5.49 billion) cash call as Italy's third-largest bank races against the clock to comply with regulators' demands to strengthen its balance sheet, a source familiar with the matter told Reuters.

JPMorgan and Mediobanca, who are leading the fund raising as global coordinators, have so far contacted a pool of banks including Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, Deutsche Bank, Unicredit and Intesa SanPaolo's Banca IMI, the source said. 

He added that UBS, which is working on Monte dei Paschi's rescue plan alongside Citi, is among the banks who have been left out from the list.

Monte dei Paschi wants to get approval from the European Central Bank for its proposed capital hike ahead of the release of the region's bank stress tests on Friday evening. Investors fear the tests will show the bank has insufficient capital levels to withstand an economic downturn. 

Monte dei Paschi, UniCredit, Deutsche Bank, Morgan Stanley and Citi declined to comment. Goldman Sachs, Mediobanca, JPMorgan and UBS were not immediately available for comment.

Monte dei Paschi has set a multiple of between 0.5 and 0.6 of its tangible book value as a threshold to back the capital hike.

That's raising concern about its proposed valuation as the bank's share price has slumped by around 75% so far this year and is currently trading at just 0.1 of its tangible book value, the source said. 

Discussions with Monte dei Paschi are currently underway and no final decision has been taken on which banks will be part of the consortium, the source added.

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