Monte Paschi seeks nod for 1 bln euro capital hike

By Silvia Aloisi

MILAN, Oct 9 (Reuters) - Banca Monte dei Paschi di Siena, Italy's No.3 lender, was set to win approval for acapital increase of up to 1 billion euros ($1.3 billion) onTuesday, part of a restructuring plan laid out in June.

The world's oldest bank, which plans to close 400 branchesand cut 4,600 job cuts, will also seek changes to itsgovernance.

MPS hopes the capital injection and stronger powers for topmanagers will help it turn the corner after having to ask forstate aid earlier this year to fix a balance sheet ravaged bythe euro zone debt crisis.

An extraordinary shareholder meeting will vote on thecapital increase, due to be launched by 2015 with option rightsfor existing shareholders waived.

That means the Tuscan bank's main investor, a cash-strappedcharitable foundation with strong ties to local politicians, isset to be diluted further after cutting its stake to 34.9percent from 49 percent this year to reimburse creditors.

After clinging to a majority stake in the bank for nearlytwo decades, the foundation has been under pressure to reduceits dependence on the lender as dividend payouts have dried up.

MPS executives, in turn, are keen to minimise politicalmeddling and streamline decision-making.

The bank will ask the EGM to approve changes strengtheningthe powers of chief executive Fabrizio Viola and chairmanAlessandro Profumo by dropping the need to get shareholderapproval for asset sales.

The measures, opposed by unions and a group of smallshareholders, have already won the foundation's backing, sotheir approval on Tuesday is not in doubt.

MPS was hit hard by the euro zone debt crisis because of its25 billion euro exposure to Italian government bonds and thelegacy of its acquisition of smaller rival Antonveneta in 2007.

It was one of four European lenders that failed to meettougher capital requirements and, in June, was forced to ask forstate aid. Under the scheme, which has yet to be approved by theEuropean Commission, it will sell 3.4 billion euros of bonds tothe Italian treasury to bolster its capital base.

The bank will pay interest on those bonds only if it books aprofit. If it ends 2012 in the red, which looks likely given a1.6 billion euro net first-half loss, the treasury will take astake in the bank to cover for the missed coupon.

($1 = 0.7657 euro)(Editing by Dan Lalor)

(silvia.aloisi@thomsonreuters.com; +39 02 6612 9723)


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