PADUA, Italy (Reuters) - Italian lenders Popolare di Vicenza and Veneto Banca have unveiled a proposed settlement deal with disgruntled shareholders that could cost the two banks more than 600 million euros (£521 million), adding to capital pressures that may push them to request state aid.
The two banks are seen as the next trouble spot in Italy's slow-burning banking crisis after the government stepped in at the end of 2016 to bail out the country's third-biggest lender Banca Monte dei Paschi di Siena (BMPS.MI).
Popolare di Vicenza's newly appointed chief executive Fabrizio Viola, who was brought in from Monte dei Paschi to oversee a merger with Veneto Banca, did not rule out the two lenders needing to tap into a new 20 billion-euro fund which Italy set up at the end of last month to help Monte dei Paschi and other struggling banks.
"Let me first assess how much money we need and then we'll see how to go about raising it," he told a news conference on Monday.
Popolare di Vicenza and Veneto Banca, both among Italy's 10 biggest banks, were rescued earlier last year by state-sponsored, privately-funded bank rescue fund Atlante after failing to find buyers for share issues totalling 2.5 billion euros to keep them afloat.
The rescue all but wiped out the savings of over 200,000 small shareholders, burning through at least 5 billion euros in financial wealth in the northeastern Veneto region, according to local business association Unioncamere Veneto.
The two banks now propose repaying 169,000 shareholders, who bought stock in the last 10 years, around 15 percent of investment losses if they agree not to pursue legal action.
"The settlement proposal aims to make the bank more attractive for potential investors," said Popolare di Vicenza's chairman, Gianni Mion.
"The bank will need more capital and it's unthinkable for investors to put money in a lender weighed down by the uncertainty stemming from pending lawsuits."
In addition to funds needed to finance the settlement deal, Popolare di Vicenza and Veneto Banca are set to book fresh loan losses in the fourth quarter as they prepare to sell off around 8 billion euros of bad debts as requested by the ECB.
The two lenders are estimated to need as much as 2.5 billion euros in capital due to loan writedowns.
Atlante, which was set up with contributions from Italy's leading financial institutions to prop up struggling banks and prevent a wider crisis, said in December it was pumping another 938 million euros in capital into the two banks.
The banks said they would settle separately on a case-by-case basis disputes with shareholders who were lent money to buy the banks' own shares or had unsuccessfully tried to sell their holdings.
The banks said they faced around 16,500 claims from customers. Shareholders who have already turned to the court are not included in the settlement proposal.
"We want to know the truth over what happened and who is guilty for it," said Sergio Calvetti, a lawyer representing around 4,000 shareholders in the two banks.
Reporting by Valentina Za; editing by Francesca Landini, Greg Mahlich