Europe Markets

Monte dei Paschi CEO: We're ready to bounce back

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The restructuring of Banca Monte dei Paschi di Siena (BMPS) presents a "demanding challenge" for the bank over the next few years but it is essential if the bank is to continue to operate independently, the Italian lender's chief executive Fabrizio Viola told CNBC on Tuesday.

In a last-minute bid to stave off nationalization, Italy's third-largest lender by assets unveiled thousands of new job cuts on Monday plans to sell off assets in a bid to return to profit. Viola said the decisions were necessary to ensure the survival of the bank.

"The logic behind having raised our profitability objectives for 2017, while continuing to reduce the risk profile of the bank, is to ensure that the bank will become a profitable one by the end of this period," viola told CNBC's Italian partner, Class CNBC, Tuesday morning.

Brought to the brink of collapse by the euro zone financial crisis and a derivatives trading scandal that emerged earlier this year, the bank is in line to receive a 4.1 billion euro loan ($5.57 billion) from the state in order to keep it afloat.

In order to receive the loan, however, the European Union (EU) has demanded that the bank produce a turnaround plan and agree to a 2.5 billion euro capital increase. In addition, the plan (the second in 18 months after the EU rejected the first plan as not tough enough) includes the loss of an additional 3,400 jobs (up from 4,600 job losses in the initial plan), the closure of 400 bank branches and targets 440 million euros of cost cuts.

(Read more: EU backs Monte Paschi capital hike plans)

Investors appeared to be appeased by the plans as shares of BMPS were trading up 2.55 percent on the Italian stock exchange, the Borsa Italiana, after the announcement.

Defending the loss of thousands of jobs, Viala said it would make the bank more productive.

"In light of the more challenging objectives that are part of this plan, we must work to implement those actions that make us more productive, in particular to strengthen our commercial distribution. Let's not forget that, with 8,000 fewer employees, we will be definition raise our productivity," he said.

(Read more: Italy's central bank sees even steeper decline for economy)

The bank must launch a 2.5 billion euro capital increase in 2014, required by the EU in order for it to meet new standards on capital buffers, and has to find investors willing to buy into the beleaguered bank which made a 3.2 billion euro loss in 2012.

The EU's competition regulator, Joaquín Almunia, said on Saturday that if the bank failed to raise 2.5 billion the Italian state will be forced to convert its bailout bonds into equity, effectively taking a stake in the lender, Reuters reported.

Despite its tarnished reputation, Viala was confident the bank could attract investors. "We believe we have created a restructuring plan that will be augmented with an industrial plan for 2013 to 2017. We will present this to the market in the next couple of months and it should explain and convince potential investors that an investment in BMPS could be an investment with an interesting return."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

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