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Monte Paschi risks nationalization if share issue delayed: chairman

A man walks on a logo of the Monte Dei Paschi Di Siena bank in Rome September 24, 2013. REUTERS/Alessandro Bianchi
A man walks on a logo of the Monte Dei Paschi Di Siena bank in Rome September 24, 2013. REUTERS/Alessandro Bianchi

By Alberto Sisto

ROME (Reuters) - A delay past January in a 3 billion euro ($4.1 billion) share issue by troubled Italian lender Monte dei Paschi di Siena would cause great uncertainty and could force the bank to be nationalized, its chairman said on Tuesday.

"As of today, we are sure of being able to do it," Alessandro Profumo said, adding that if the issue does not go through "we enter a zone of great uncertainty."

"It could be that if we are unable to do it, the bank would then be nationalized," he said in an interview to be broadcast on Italian state television later on Tuesday and witnessed by reporters.

Italy's third-biggest bank and its top investor have clashed over the timing of the issue, with the board voting against a proposal from Fondazione Monte dei Paschi di Siena to delay it at least until May from January.

A shareholder meeting has been called for December 27 to vote on both proposals, but the foundation - a not-for-profit body with close ties to local politicians in Siena - has a big enough holding in the bank to veto any unwanted decisions.

The share issue is part of a tough restructuring plan demanded by the European Commission for approving a 4.1 billion euro state bailout the bank received earlier this year.

Profumo and Chief Executive Fabrizio Viola want to carry out the rights issue as soon as possible, and have secured a pool of banks to guarantee it - but only if it is launched by the end of January.

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"(If we delay it) we would have to re-create a consortium of underwriters, and we do not know what will happen at the political level," Profumo said.

Asked whether he would resign from the bank should the shareholder meeting vote in favor of a postponement of the rights issue, Profumo said: "Let's see what happens."

Saddled with around 340 million euros of debt, the foundation says it needs more time to find a buyer for all or part of its 33.5 percent Monte Paschi stake to pay back creditors.

It fears that the cash call will put pressure on the stock price and make it harder for it to sell its stake. But uncertainty over the timing of the issue is already weighing on Monte dei Paschi shares, which fell 4.9 percent on Tuesday and have lost around a quarter of their value in the past month.

Under the agreement with the EU, if Monte dei Paschi cannot complete the capital increase by the end of 2014 it will have to convert state loans it received in the bailout into shares issued to the Italian treasury.

The bank is hoping instead to pay back the bulk of the state aid through the cash call and said a delay would cost it at least 120 million euros in interest payments.

Monte Paschi was kept afloat by the state loans which plugged a capital shortfall that arose after the bank was hit hard by the euro zone debt crisis and a derivatives scandal.

It is on track to post its third straight annual loss after losing nearly 8 billion euros in 2011 and 2012.

The size of the rights issue is higher than the lender's stock market value, which has fallen below 2 billion euros. ($1 = 0.7283 euros)

(Writing by Silvia Aloisi; Editing by David Holmes)

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