The Italian state has stepped in with funding to save yet another failing bank, meaning taxpayers now stand responsible for over 22 billion euros ($25.4 billion) of bailout money recently extended to the sector.
Finance Minister Pier Carlo Padoan announced late Tuesday that the government had received approval from the European Commission to pump 5.4 billion euros into Banca Monte dei Paschi di Siena (BMPS) in exchange for the lender undertaking a major restructuring overhaul.
BMPS revealed an outline of its new 2017 – 2021 plan on Wednesday morning which it says will deliver a net profit of over 1.2 billion euros and a return-on-equity of over 10 percent by 2021. Management has committed to implementing a headcount reduction of around 5,500 and to close around 600 of the bank's existing 2,000 branches as well as a pay cap for senior management. BMPS also said that its CET1 ratio (its common equity tier 1 ratio which is a key standardized measure of a bank's financial strength) should reach 14.7 percent by 2021.
Toxic assets are at the heart of the bank's demise and its plan includes the intention to sell down 28.6 billion euros of gross non-performing loans (NPLs), of which 26.1 billion euros will be securitized (converted into marketable securities).