Monte Paschi Reports Almost $1 Billion Loss as Legal Claims Soar

(Bloomberg) -- Banca Monte Dei Paschi di Siena SpA, posted a loss after booking writedowns of 476 million euros ($564 million) on deferred tax assets and said legal claims against the state-rescued bank increased by billions of euros.

The second-quarter loss totaled 845 million euros compared with a 65 million-euro profit a year earlier. The bank increased loan-loss povisions and took 384 million euros of other charges including legal claims and costs related to a de-risking transaction.

Monte Paschi is seeking to exit state ownership by 2021 after the state gained 68% of the bank in a 2017 recapitalization. Civil and criminal cases related to its former management have dogged the Siena-based lender since the rescue and legal risk is seen as a potential impediment to any deal that make take the bank out of government hands.

The bank received additional claims of 3.8 billion euros from Fondazione MPS -- its former main investor, at the end of July, the bank said in a statement, increasing the total to 4.8 billion euros.

Monte Paschi disputes the claims put forward by the group and “reserves all actions to protect its assets in response to the FMPS initiative.”

The lender reduced the value of its deferred-tax assets, to take into account “future taxable income estimates according to the new macroeconomic scenario.” Deferred tax assets are past credits and deductions that companies can use to offset future fiscal payments.

Monte Paschi set aside more money for souring loans due to
the pandemic crisis. In June, it approved a plan to take more
than 8 billion euros of bad loans off its books, a key step in
the bank's recovery. The deal, which will reduce the bank's
non-performing loan ratio to 4.5% from 10.4%, may favor an exit
strategy that involves merging the bank with an Italian peer.

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