Yahoo Finance Italy's Monte Dei Paschi shares slump as judge demands new probe
By Emilio Parodi
MILAN (Reuters) -Shares in the Italian bank Monte dei Paschi di Siena fell as much as 10% on Wednesday, after a judge asked Milan prosecutors to investigate alleged fraud in relation to the bank's rescue in 2017, according to a document seen by Reuters.
Shares in the bailed-out Tuscan lender have more than doubled in price since the start of 2023, allowing the state to cut its stake to 26.7% through market placements that attracted investment funds.
The document showed that prosecutors have six months to investigate whether false accounting in 2016 and 2017 was used to conceal the fact that "the bank was not solvent, which would have prevented the state bailout".
The alleged offence relates to the misclassification of loans as "performing" rather than "impaired".
Italy pumped 5.4 billion euros into MPS in 2017 under a so-called precautionary recapitalisation, which under European Union rules applies only to viable companies, so that public money is not used to cover any actual or expected losses.
The European Central Bank carried out a health check on MPS at the time, to unlock state aid in compliance with EU competition rules.
Italy's Treasury negotiated the rescue with the European Commission, committing to eventually cutting its MPS stake to ensure the state aid was only temporary.
Giuseppe Iannaccone, a lawyer representing some former MPS senior executives, criticised the decision, which he said would lead to a "new and completely useless trial".
"Prosecutors have already ascertained that the defendants acted in good faith and in compliance with indications from national and international supervisors," he said.
MPS's judicial troubles started easing two years ago, improving the chances of finding a buyer and allowing MPS to set aside funds to cover its legal risks.
In May 2022 an Italian appeals court overturned a previous ruling, acquitting all defendants over derivatives deals that prosecutors alleged had helped MPS to hide losses.
In December 2023, MPS's former chief executive officer and chairman were also acquitted on appeal, after being jailed for six years, in a strand of the derivatives case.
The previous month, Milan's civil appeals court had upheld a ruling rejecting claims for 450 million euros of damages in relation to the derivatives deals.
However, a decision is still pending in Milan over a prosecutor's request that former top MPS executives be sent to trial over the classification of impaired loans.
Milan traders said the latest ruling made some investors uncomfortable holding MPS stock.
After the bailout, which drew a line under a decade-long crisis, Italy held 68% of MPS.
The bank has been successfully restructuring under Chief Executive Luigi Lovaglio, benefiting like its peers from higher interest rates and falling costs after he pulled off a 2.5 billion euro capital raise in late 2022 to fund staff exits.
(Additional Reporting by Alberto Chiumento and Giancarlo Navach; Writing by Valentina ZaEditing by Keith Weir and Kevin Liffey)
