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Carige's top investor meets ECB after blocked cash call: Sources

Key Points
  • Top investor discussed bank's prospect with ECB, source claims.
  • Malacalza family failed to back cash call over the weekend.
  • Carige is Italy's last large problem bank.
A pedestrian passes a Banca Carige SpA bank branch in Rome, Italy.
Alessia Pierdomenico | Bloomberg | Getty Images

The top investor in Banca Carige met European Central Bank supervisors on Thursday to explain why he did not back a vital cash call at the troubled Italian lender, a source close to the matter said.

Carige on Saturday failed to win approval for a 400 million euro ($455 million) share sale that was part of a rescue plan financed by Italian lenders to shield the industry from the risk of another banking collapse.

Italy's Malacalza family holds 27.6 percent of Carige after investing more than 400 million euros to prop up the ailing Genoa-based bank. Their stake is worth less than 25 million euros at current market prices.

On Saturday the Malacalzas prevented the latest cash call from being approved saying they first wanted more clarity on the bank's future business plan and possible merger options as well as any further requests from the regulator.

The source said the Malacalzas had flown to Frankfurt and met for more than an hour with ECB officials explaining the reasons for not backing the proposed cash call.

A second source said earlier on Thursday that a meeting was due to take place by Friday at the latest and was likely to discuss the bank's prospects.

Carige's Chief Executive Fabio Innocenzi is also expected to meet ECB supervisors in person after he briefed them on the outcome of Saturday's meeting before Christmas, the second source said.

Banca Carige and the ECB declined to comment.

Carige's future depends on customers and investors' reaction to the latest setback. The bank has faced liquidity crises in the past, lastly a year ago when it almost failed to push through the previous cash call - its third in four years.

Shares in Carige lost 12.5 percent at 0.0014 euros by 1555 GMT.

Raising funds

The ECB has direct oversight of Italy's 10th-largest bank, which it has been pushing to shed bad debts and boost capital.

Carige is Italy's last remaining large problem bank after Rome bailed out Monte dei Paschi di Siena in 2016 and bankrolled the rescue of two smaller lenders based in the Veneto region by Intesa Sanpaolo last year.

Another bank widely seen as a possible rescue candidate, unlisted Popolare di Bari, is supervised by the Bank of Italy given its smaller size.

Carige has raised 2.2 billion euros from investors since 2014, piling up 1.5 billion euros in losses over the same period, mainly due to bad loans.

Carige's troubles stem from decades of mismanagement and an excessive exposure to the depressed local economy. It has also undergone a string of top management shake-ups since the Malacalzas replaced a local charitable foundation as the single largest shareholder in the bank.

The Malacalzas made their money in the steel business, selling their interests in 2007 for a reported sum of around 1 billion euros. They then invested in tyremaker Pirelli, cashing in 500 million euros in 2015 on the sale of their stake.

To stay afloat in recent years Carige has sold off its best assets, such as its insurance units, and it would struggle to attract a merger partner as recommended by the ECB.

The latest stock offer was meant to allow Carige to convert into equity a 320 million euro subordinated bond it sold to other Italian lenders last month.

The conversion would have helped Carige beef up its core capital ratio, which stood at 10.8 percent at the end of September - above a minimum requirement of 9.63 percent set by the ECB but below the ECB's suggested level of 11.18 percent.

The ECB sets the minimum core capital level for individual banks each year and Carige's 2019 threshold is not yet known.

($1 = 0.8782 euros)