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ROME (Reuters) – Italy’s Treasury is discussing with European Union authorities the possibility of extending by more than two years a 2021 deadline to cut Rome’s 64% stake in ailing bank Monte dei Paschi di Siena (MPS), two sources told Reuters.
Under the terms of a 5.4 billion euro ($6.12 billion) state bailout agreed with Brussels in 2017, Italy was supposed to have a deal in place by the end of this year to re-privatise MPS, but this has not proved possible.
Talks to sell the Tuscan lender to the country’s No.2 bank UniCredit collapsed in October, leaving the Treasury chasing alternative options.
Rome expects to win Brussels’ approval for a lengthy extension of the deadline to return MPS to private hands. This will give the government time to boost the bank’s profitability and attract new investors, the sources said, asking not to be named because of the sensitivity of the matter.
The extension being sought will be “more than two years,” one of the sources said. This was confirmed by a second source familiar with the matter.
Shares in MPS jumped almost 17% on Wednesday, with traders saying the Treasury-led restructuring could make the lender more appealing for a potential partner.
In a further boost on Wednesday, ratings agency Fitch removed a negative rating watch on the bank.
Both sources said the Treasury would make every effort to keep the new deadline confidential, in order to avoid the risk that potential buyers wait until it is looming to table an offer when the government is under pressure.
However, the extension will largely cover the timeline of MPS’ new industrial plan ending in 2025, provided the EU competition authorities authorise it.
The Treasury firstly needs to address the bank’s capital requirements, which MPS has put at 2.5 billion euros.
Reuters reported in October that the cash call could total 3.5 billion – to cover layoff costs and other expenses – or more than 3.5 times the bank’s current market value.
Rome will also implement some of the measures that were offered to UniCredit as part of a stand-alone solution for MPS, the sources said.
The plan will clear the bank of its residual problem debts, which will go to state-owned bad loan manager AMCO, while state agency Fintecna will take on risks from MPS’ pending lawsuits.
($1 = 0.8839 euros)
