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Tension rises ahead of Monte Paschi meeting on cash call

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[December 28, 2013]  By Silvia Aloisi

SIENA, Italy (Reuters)  Tensions at troubled Monte dei Paschi di Siena <BMPS.MI> grew on Friday with sources saying Chairman Alessandro Profumo may quit if the Italian bank's top investor slaps him on the face by delaying a vital 3 billion euro ($4.11 billion) capital hike.

The world's oldest bank was forced to accept 4.1 billion euros of state aid earlier this year after being hammered by the euro zone debt crisis and loss-making derivatives trades.

The Tuscan bank needs a cash call to repay the state aid and avert nationalization. Profumo and CEO Fabrizio Viola want to launch it in January and have asked shareholders to approve this time framework this week.

They have already secured a pool of banks ready to guarantee the rights issue and would like to carry it out quickly to remove uncertainty and avoid a string of cash calls by other European lenders that might make fundraising harder.

But the biggest shareholder  a cash-strapped not-for-profit foundation with close ties to politicians in Siena  is determined to push back the cash call to mid-2104 to win more time to sell down its 33.5 percent stake and repay debt.

A shareholder meeting due on Friday had to be reconvened for Saturday as only 49.3 percent of investors showed up, below the required 50 percent plus one legal threshold. This was mainly due to small investors still enjoying the Christmas break.


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

A stone-faced Profumo left Friday's aborted meeting without making comments.

Aides and bankers close to the situation said Profumo, a strong-willed, internationally respected banker, could resign if the foundation votes against his proposal for a January cash call on Saturday as expected.

"He is very annoyed," said an aide.

The 56-year old former CEO of UniCredit <CRDI.MI>, who bought Germany's Hypovereinsbank and Italy's Capitalia while at the helm, left Italy's largest bank by assets in 2010 after clashing with core shareholders, a group of baking foundations.

The millionaire banker, who chose to receive a token salary of around 60,000 euros when he joined the beleaguered Monte dei Paschi in April 2012, may decide to quit if the foundation publicly defies him with what would essentially amount to a no-confidence vote, insiders said.

Antonella Mansi, a feisty 39-year-old businesswoman recently appointed head of the Monte dei Paschi foundation, said on Friday she was serene. "See you tomorrow," she told reporters, knowing she can count on a stake large enough to block any unwanted decision at Saturday's meeting.

"It's important to carry out the capital increase as early as possible," said Roberto Lottici, fund manager at Ifigest. "Monte dei Paschi is being kept afloat by the state loans, but they are very costly."

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STATE AID

The rights issue, along with a tough restructuring plan, is among the conditions the European Commission imposed before giving its green light to the state aid for Monte dei Paschi.

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

Monte dei Paschi shares rallied 4 percent in early trading, but dropped after the shareholder meeting was rescheduled. The stock was down 1.7 percent at 0.174 euros at 8:13 a.m. ET.

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.

"We cannot let the third biggest bank in this country fall prey to foreign interests," he told reporters. "Monte dei Paschi is not just an issue in Siena, it is a big national issue."

Saddled with around 340 million euros 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 nationalized.

Under the agreement with Brussels, if Monte dei Paschi cannot complete the capital increase by the end of 2014 the Treasury would convert the bonds it bought from the bank into shares, effectively nationalizing the bank.

The bank, which is axing 8,000 jobs and shutting 550 branches, said a delay in the cash call would add 120 million euros of costs from interest payments on the state debt.

(Additional reporting by Danilo Masoni; editing by Lisa Jucca and Peter Graff)

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