* Q3 loss of 47 mln euros vs forecast 60 mln profit
* Writedowns on bad loans weigh; deposits pick up
* EU Commission still discussing terms of state aid-CFO
By Silvia Aloisi
MILAN, Nov 14 Banca Monte dei Paschi di Siena
reported an unexpected third quarter loss on Wednesday
due to a big increase in writedowns on bad loans, showing the
impact of Italy's weak economy on the country's third biggest
Bad loans are a major problem for Italian banks due to the
country's deep recession and there is no relief in sight as the
economy is expected to continue to shrink next year.
Monte dei Paschi is particularly vulnerable because problem
loans account for 17 percent of its loan book - above the 13
percent average of Italian banks.
In contrast to larger rivals UniCredit and Intesa
Sanpaolo, which reported better-than-expected
third-quarter profits this week, Monte dei Paschi posted a third
quarter net loss of 47.4 million euros ($60.3 million). Analysts
had expected a profit of about 60 million euros.
The writedowns on bad loans, which offset trading gains,
totalled 1.3 billion euros in the first nine months of the year,
up 56 percent from a year earlier.
The world's oldest bank, based in Tuscany, had already ended
the first half of 2012 with a 1.6 billion euro loss because of
hefty impairments on its costly 2007 acquisition of smaller peer
That purchase, plus the bank's vast holdings of Italian
government bonds, have strained its capital base and, in June,
forced it to ask for 3.4 billion euros in government aid. But
the bank said Rome was still discussing the terms of the rescue
deal with the European Commission.
Monte Paschi is the only Italian bank that failed to meet
new minimum capital rules set by European regulators.
"They are still struggling," said Ronny Rehn, an analyst at
KBW Europe, citing lower net interest income, lower commissions,
higher than expected costs and steep loan-loss provisions.
The bank's shares fell 4.6 percent to 0.20 euros by 1115
Chief Financial Officer Bernardo Mingrone said the
government aid was still awaiting approval by the European
Commission, which is questioning terms set by the Italian
Talks centre on the value of new shares Monte dei Paschi
would issue to the Italian Treasury if it were not able to pay
interest on loans from the government.
This would affect the size of any government holding in the
bank, which would be much bigger if the value of the new shares
were to be based on the current share price.
"The thinking in the European Commission is that these
operations should be done at market value," Mingrone told
At current share prices, missing an estimated yearly coupon
payment of around 10 percent on the whole state loan would give
the Treasury roughly 13 percent in Monte dei Paschi.
An Italian government decree in June said instead the value
of the new shares should be based on the bank's net assets,
which would mean a much lower government holding of 3.3 percent.
Mingrone said he expected approval of aid package by year
On the bright side, Monte Paschi's deposits snapped a string
of negative quarters to grow 2.2 percent in the three months to