Monte dei Paschi di Siena Chairman Could Quit Over Shareholder Battle

The world's oldest bank, Banca Monte dei Paschi di Siena (MPS), is in trouble again after sources revealed that chairman Alessandro Profumo may quit the bank if its top investor prevents him from raising €3bn needed to avoid nationalisation.

Trouble at MPS started when it was forced to except €4.1bn (£3.5bn, $5.5bn) of state aid earlier in 2013 thanks to the eurozone debt crisis and loss-making derivatives trades.

The bank needs to repay the money it received from the state in order to avoid nationalisation, according to Profumo.

He and CEO Fabrizio Viola want to launch a cash call in January 2014 to save the bank, and have asked the firm's shareholders to approve the idea this week.

Both of the bank's leaders have secured a pool of banks to guarantee the rights issues and would like to carry it out quickly to remove uncertainty that could make fundraising harder.

But MPS's largest shareholder, a cash strapped not-for-profit foundation led by Antonella Mansi, who was recently appointed head of the Monte dei Paschi foundation, is determined to block the cash call until mid-2014, to sell the foundation's 33.5% stake in the bank.

The matter is further complicated by the fact that the Monte dei Paschi foundation is based in the Tuscan city of Siena and has connections to local politicians that are also determined to delay the cash call demanded by Profumo.

Profumo who joined MPS in April 2012 may decide to quit if the foundation publicly defies him with a no-confidence vote, according to Reuters.

A shareholder meeting due on Friday 27 December had to be reconvened for Saturday 28 December as only 49.3% of investors showed up, below the required 50% plus one legal threshold.

On Saturday, the required number of shareholders will be lowered to one third, allowing the foundation to easily postpone the proposed capital increase.

The rights issue, plus a tough restructuring plan, are among the terms the European Commission imposed before giving its green light to the state aid for MPS.

The size of the capital increase is higher than the lender's stock market value of around €2bn and the operation is regarded as risky, as the bank is still loss-making.

Siena mayor Bruno Valentini, whose city council is the top stakeholder in the Monte dei Paschi foundation, said postponing the cash call might help keep the bank in Italian hands.

Saddled with roughly €340m of debt, the foundation is looking for a buyer for all or part of its stake.

It fears that a cash call next month would massively dilute its holding and leave it with virtually nothing to sell.

Profumo said last week that a delay would bring uncertainty and could force the bank to be nationalised.

Under the agreement with Brussels, if MPS cannot complete the capital increase by the end of 2014 the Italian Treasury would convert the bonds it bought from the bank into shares, that would effectively nationalise the bank.

The bank, which is axing 8,000 jobs and shutting 550 branches, added that a deferral in the cash call would add €120m of costs from interest payments on the state debt.