Timing of Banca Carige cash call in spotlight at central bank talks
MILAN (Reuters) - Italian mid-sized bank Banca Carige risks a delay to a vital 800 million euro (658.1 million pounds) cash call to strengthen its balance sheet after its largest shareholder sought to put off the bank's fundraising plans.
Carige's chairman and chief executive are meeting Bank of Italy officials on Tuesday at a scheduled gathering with supervisors that could bring some clarity to the situation.
Genoa-based Carige is one of a number of Italian banks set to raise a total of 7 billion euros in fresh capital this year to absorb rising bad debts from the country's weak economy.
The dispute over the cash call mirrors wrangling that took place between management and the biggest shareholder at Banca Monte dei Paschi di Siena , Italy's No. 3 bank.
Its main investor, a charitable banking foundation, successfully pushed back to at least mid-May a 3 billion euro capital hike the management had wanted to carry out in January to get an early claim on investors' cash.
Carige's management want approval for its capital hike by the end of March, a timetable that the Bank of Italy also favours. But Carige's biggest shareholder, the Carige foundation, with a 46 percent stake, has no money to invest in it and would face major dilution of its holding.
The foundation said late on Monday it would either call an extraordinary shareholder meeting to extend the end-March deadline or let the rights issue be approved by then but with its start scheduled for June.
Charitable foundations became key shareholders in leading Italian banks following the privatisation of publicly-owned banks and the transformation of savings banks into limited companies starting in the early 1990s.
After supporting banks' recapitalisation efforts in the past, some foundation shareholders have become an obstacle to fundraising plans.
"There are no examples outside of Italy of charitable institutions whose wealth is invested in just one class of assets," Stefano Gatti, finance professor at Milan's Bocconi University, said.
"(This) has made the foundations' fortune during good times but risks ruining them now that things have changed."
Failure to boost Carige's capital base by mid-year would likely result in Carige failing to meet minimum standards set by the European Central Bank as part of its Europe-wide health check of banks.
Genoa-based Carige, one of 15 Italian banks currently under ECB scrutiny, had a Core Tier 1 ratio of 5.8 percent at the end of September. The ECB wants banks to have a Common Equity Tier 1 ratio, a more stringent measure of financial health than the Core Tier 1, of at least 8 percent.
"Ongoing discussions between the bank's management and the Carige foundation, the top shareholder with a 46 percent stake, are focusing on the timing and the modality of the capital strengthening plan," Luca Comi, an analyst at ICBPI, said.
"The foundation would like to gain more time, in the hope it can sell a portion of its stake to some strategic partners and hoping that a sale of insurer Carige Assicurazioni might reduce the size of the cash call," Comi said, referring to an insurance subsidiary of the bank.
"Time is running out. The meeting at the Bank of Italy today may help clarify the central bank's stance."
Banca Carige declined to comment.
Shares in Banca Carige were down 1.26 percent at 0.481 euros a share at 1007 GMT, while the European banking index was down 0.31 percent <.SX7P>.
(Reporting by Lisa Jucca, additional reporting by Valentina Za. Editing by Jane Merriman)
