Italian Lender Monte Paschi's Shares Drop on Disappointing Q3 Results
People arrive at Banca Monte dei Paschi in Siena, in January, 2013 (Reuters).

Banca Monte dei Paschi di Siena's (MPS) shares have fallen as a disappointing third-quarter trading statement raises doubts about the troubled bank's ability to execute a stock sale in 2014, and avoid nationalisation.

Monte Paschi's stock was trading 2.18% lower to €0.220 at 13:04 hrs CET in Milan.

On 14 November, Italy's third-largest lender said that its third-quarter net loss widened to €138.3m (£115.6m, $185.9m), from €25.9m a year ago.

Loan-loss provisions grew to €511m in the July-September quarter, against €461m a year ago.

The bank reported a net loss of €518m (£433m, $697m) in the nine months to 30 September.

The Siena-based lender said its net exposure to bad debts hovered at €20bn at the end of September.

The world's oldest bank, which came close to financial collapse during the eurozone debt crisis, must raise €2.5bn through a stock sale in 2014 - more than double the amount originally proposed by its managers.

Failure to do so would result in the nationalisation of the bank - with the Italian government converting state loans into equity.

Chief Executive Fabrizio Viola told analysts on a 14 November conference call that the bank had three potential windows to initiate the share sale - January 2014, June or the end of that year.

"It's clear that the more time goes by, the more difficult it gets," Viola added.

Turnaround Plan

On 7 October, MPS made public a radical turnaround plan that entails 8,000 job cuts and aims for €440m in cost savings. The bank has already laid off 2,700 employees.

Under the new plan, MPS intends to repay its state loans fully by 2017, and expects to report a net profit of €900m by that date. The bank plans to repay €3bn to the government in 2014.

The bank proposes to reduce its €23bn Italian government debt portfolio to about €17bn by end 2017.

The bank also said it would cap top executives' pay packages, at €500,000 a year, until the capital increase is completed or the state aid is fully repaid.

The moves are aimed at appeasing the European Union, which has to approve Monte Paschi's €4.1bn (£3.4bn , $5.5bn) rescue aid.

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