BMPS shares rocket after surprise Q1 profits

A return to profit at Italy's bailed-out BMPS lit a fire under the bank's shares
AFP

Milan (AFP) – Shares in Banca Monte dei Paschi di Siena shot up over 11 percent on Friday after the bailed out bank surprised investors by a return to profit in the first quarter of the year.

The bank’s share price rose nearly 10 percent to 2.99 euros in midday trading after posting net profits of 188 million euros ($224 million), against losses of 169.2 million a year earlier and 502 million in the fourth quarter of 2017.

Analysts had expected a loss of 11 million euros for BMPS, according to financial services provider Factset.

Revenues slid by six percent to 876.8 million euros, but that beat analyst estimates of a drop to 866 million.

Founded in 1472 in Siena, BMPS was forced to ask for state help last year after bad loans and losses saw the world’s oldest bank become the weak link in the country’s recovering banking system.

Italy responded with an EU-approved bailout of 5.4 billion euros of public money to keep BMPS afloat.

The rescue resulted in an injection of public funds and the use of subordinated bonds to allow its return to the capital markets. Its largest shareholder is now the Italian Ministry of Economy and Finance, which controls 68.2 percent of BMPS’s capital.

In order to return to profits, after years of losses, the BMPS is engaged in a vast restructuring. 

It has to reduce its workforce by 20 percent to 20,000 people by 2021, but without any redundancies, and close 600 of its 2,000 branches. 

Its plan also provides for the sale of 28.6 billion euros of bad loans by 2021.

Italian banks, previously seen as a source of concern for the eurozone’s financial system, seem to be getting themselves in order.

In the past year, the stock market index for Italian banks has risen more than 11 percent as the country’s largest banks post strong results.

UniCredit, which has been engaged in a major restructuring since July 2016, has just recorded its best first quarter since 2007 with net profits jumping 22.6 percent year-on-year to 1.1 billion euros.

Banco BPM’s quarterly profit nearly doubled to 223 million euros, although it was below market expectations, while Intesa Sanpaolo saw its net profit rise by 39 percent to 1.25 billion euros, its best result in a decade.

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