Milan

MPS says may not repay bailout

'Nothing can be taken for granted' says Profumo

MPS says may not repay bailout

(By Denis Greenan). Milan, April 29 - Monte dei Paschi di Siena (MPS), the world's oldest lender, added a new twist to its saga of woes Monday when it said it might not be able to repay a controversial government bailout. The president of the scandal-hit Tuscan bank, Alessandro Profumo said it was "not certain" that the troubled bank would be able to refund the four-billion-euro package. "I believe we can do it, but nothing can be taken for granted," Profumo said. Repaying the government bailout is "the main challenge" facing the bank, he said. But if it succeeds, Profumo added, it will be "the only way to maintain (its) independence and headquarters in Siena". However, Profumo, who previously served as chief executive of Italy's biggest bank UniCredit, said the lender was on the right track. "The bank has totally turned a corner with respect to the past in terms of transparency and capital solidity." MPS was in a good position, Profumo said, for its recent restructuring program put it on a good footing to compete with other lenders. "We know that all other banks will have to go down the cost-containment road and on this aspect we will have a competitive advantage," the executive said. That said, Profumo signaled that "there is much more to be done in terms of profitability, even though we're starting to see signals of an inversion". Italy's third-largest lender, which recently revealed losses of more than three billion euros last year, is at the centre of a huge fraud probe after a scandal over shady derivatives operations exploded in January. It has since emerged that a previously undisclosed series of derivative and structured-finance deals produced losses of around 720 million euros. Senior officials from MPS are facing penalties totalling as much as five million euros from the Bank of Italy for alleged fraud and corruption. On Saturday an Italian judge rejected a prosecutors' order for 1.8 billion euros of assets held by Japanese investment bank Nomura to be seized as part of the probe into the scandal. Prosecutors ordered the seizure earlier this month and said they had put Nomura's former chief executive in Europe, the Middle East and Africa under investigation. Nomura was involved in one of a series of suspect derivative and structured-finance deals involving MPS. Prosecutors said Sadeq Sayeed, the former head of Nomura International plc, was being probed along with another manager from the Japanese investment bank, Raffaele Ricci. The prosecutors said the Nomura seizure regarded 88 million euros of hidden commissions received by Nomura and 1.7 billion euros of funds deposited with Nomura by MPS by way of collateral for a loan. But on Saturday a judge said there was no urgent need to seize the assets. The judge also overruled an order to seize 14 million euros belonging to former MPS chairman Giuseppe Mussari, former general manager Antonio Vigni and former finance chief Gianluca Baldassarri. Sayeed, Ricci, Mussari, Vigni and Baldassarri are being probed for crimes including usury, aggravated fraud, obstructing banking watchdogs and issuing false statements. The judge on Saturday expressed doubts about the validity of the possible charges of usury and fraud. Mussari last year resigned from MPS and stepped down from his subsequent post as chairman of the banking association ABI after the scandal exploded in January. Baldassarri is under house arrest. There are also suspicions senior MPS managers were involved in alleged corruption in the nine-billion-euro acquisition of rival bank Antonveneta, at least two billion above its market value, in 2008. David Rossi, MPS's communications chief, committed suicide last month by throwing himself out of a window at the bank's headquarters in Tuscany. He was not being probed.

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