Monte Paschi's biggest investor denies stake sale

By Silvia Aloisi

MILAN (Reuters) - The biggest shareholder in Monte dei Paschi di Siena on Thursday denied press reports that it had sold a stake of at least 8 percent in Italy's third-largest bank.

Three Italian newspapers reported that the Monte dei Paschi foundation, which owns 31.5 percent of the bank, had sold between 8 and 12 percent on Wednesday, sending the shares sharply higher for a second consecutive day.

But in a statement issued at the request of market watchdog Consob, the foundation, a not-for-profit entity with close ties to local politicians, said no transaction was carried out on Wednesday.

The foundation had "not entered into any sale or purchase contract regarding its stake in Monte dei Paschi," the statement said.

The cash-strapped foundation is desperate to find a buyer for the bulk of its stake before the troubled bank launches a 3 billion euro ($4.12 billion) capital increase in June. The foundation needs the money to repay creditors and fears a share issue would greatly reduce the value of its holding.

Monte dei Paschi's shares initially held on to their gains after the foundation's denial on Thursday but then suddenly fell and were temporarily suspended for excessive volatility in mid-morning trade.

They were down 1.2 percent at 0.217 euros by 1208 GMT in heavy volume of more than 1 billion shares - around 10 percent of the bank's capital.

"We're fumbling in the dark to work out why it's moving like this as well," said a trader.

"It's a very strange market, especially considering other banks that have announced capital hikes are rising today as well, like Carige . There is obviously speculation on the MPS stock but it's not enough to justify these volumes."

Thursday's share wobble followed a 20 percent rise on Wednesday, also in brisk volume of 1.5 billion shares, driven by speculation about a stake sale.

Selling shares would usually push the stock price of a company down.

But if the foundation finally found investors willing to take a large stake in the bank and maybe even buy into the upcoming share issue, that would boost Monte dei Paschi's shares by removing some uncertainty and possibly also fuelling takeover speculation, traders and bankers say.

Consob is investigating Wednesday's share move, according to a source at the regulator. Anyone buying a stake in an Italian listed company of more than 2 percent has to inform the regulator within five days.

Italian financial daily Il Sole 24 Ore reported on Thursday that the foundation sold a stake the previous day of around 8 percent to investors that included U.S. hedge fund Och-Ziff, at a price of 0.16-0.17 euros.

Il Messaggero daily said a 12 percent stake had been sold and also named Och-Ziff as a buyer. A third newspaper, Il Fatto Quotidiano, said the stake sold to Och-Ziff was 8-10 percent.

Och-Ziff was not immediately available for comment.

(Additional reporting by Stephen Jewkes, Isla Binnie, Stefano Bernabei; Editing by Erica Billingham)