* 75 pct of Monte Paschi lending pool stock on loan
* The most in demand stock for shortselling on FTSE MIB
* Monte Paschi has revealed big losses on derivatives
By Laurence Fletcher
LONDON, Feb 3 Big-name London hedge funds Odey
Asset Management and Egerton Capital are among those upping
their bets against Monte dei Paschi di Siena in recent
days, after revelations the troubled Italian bank faces heavy
Italy's third-biggest bank is under investigation for an
opaque series of derivatives and structured finance contracts
between 2007 and 2009 that could cost it 720 million euros. The
scandal surrounding the world's oldest bank, which is already in
need of a 3.9 billion euro ($5.34 billion) state bailout, has
become a campaign issue three weeks before Italy holds national
Shares in the Monte Paschi are now the most in demand in
Italy's FTSE MIB blue-chip index for short-selling by
hedge funds, with 75 percent of those of its shares available to
borrow - the "lending pool" supplied by institutional investors
- now out on loan, according to data group Markit.
That so-called utilisation rate for short-selling - selling
borrowed stocks in the hope the share price will fall so they
can be bought back more cheaply - has picked up sharply from
below 52 percent on Jan. 23.
Prime brokers, who provide finance and lend stock to hedge
funds, have had to meet some of the demand for shares in the
540-year-old Tuscan lender from their own supplies, such has
been the interest from short-sellers. France's Peugeot
, one of the carmakers hardest hit by the industry's
tumbling sales in Europe, is in the same boat.
Egerton, based in London's upmarket Mayfair district, has
been aggressively increasing its short bet. It took a short
position of 0.68 percent of Monte Paschi on Jan. 24, according
to the website of Italian regulator Consob, and had increased
this to 0.97 percent by Friday.
Meanwhile Odey, headed by high-profile manager Crispin Odey,
also took a position of 0.57 percent on Jan. 24.
Boston-based Wellington Management Company, meanwhile, has
held a short position since before the bank's complex and
loss-making derivatives transactions came to light late last
month, but increased its position to 0.7 percent on Jan. 23.
Egerton Capital and Wellington declined to comment. Odey did
not respond to requests for comment.
Short interest in Monte Paschi, as measured by utilisation,
hit a year-high towards the end of last year but fell back
sharply in January as its shares rallied.
So far short-sellers' bets are unlikely to have paid off;
though the shares fell heavily at the end of January and lost
another 5.9 percent to 0.232 euros on Friday, they made gains
earlier in January so are still slightly above their closing
level at the end of last year.
"This stock has been in short-sellers' sights for some
time," said Alex Brog, director at Markit. "Up until recently,
however, shorts were covering their positions, until the recent