December 28, 2018 / 4:01 PM / a month ago

Italy's Carige still looking for solution after inconclusive meetings-sources

MILAN, Dec 28 (Reuters) - Troubled Italian lender Carige is still looking for a solution to safeguard its future after inconclusive meetings in Frankfurt on Thursday over a failed cash call approval, two sources familiar with the matter said.

The Genoa-based bank on Saturday failed to win shareholder backing for a 400 million euro ($455 million) share issue that was part of a rescue plan financed by Italian lenders to shield the industry from the risk of another banking collapse.

The European Central Bank, which supervises directly Italy’s 10th largest bank, has told Carige to complete its capital strengthening plan and seek a merger with a stronger partner.

The bank’s top investor is Italy’s Malacalza family which holds 27.6 percent of Carige after investing more than 400 million euros for a stake worth 20 million euros at current market prices.

ECB supervisors on Thursday met with both the Malacalzas and Carige’s chief executive in Frankfurt, one of the sources said, adding talks failed to yield concrete results.

A second source confirmed a solution to the stalemate was yet to emerge.

Carige declined to comment.

But sources have said the bank, which has sold off its best assets in recent years to survive and is heavily exposed to the depressed local economy, attracts little interest from potential suitors.

The Malacalzas on Dec. 22 prevented the cash call from being approved because they first wanted more clarity on the bank’s future business plan and possible merger options as well as any further capital requests from the regulator.

The family of steel billionaires came to Carige’s rescue in 2015, ushering in a period of management instability. They pushed out a third chief executive in September, when Carige appointed former UBS banker Fabio Innocenzi as CEO.

The latest stock offer, the fourth since 2014, was meant to allow Carige to convert into equity a 320 million euro subordinated bond it sold to other Italian lenders last month.

Carige’s future depends partly on customers and investors’ reaction to the latest setback. The bank has faced liquidity crises in the past, lastly a year ago when it almost failed to push through the previous cash call.

The bond conversion would beef up Carige’s core capital ratio, which stood at 10.8 percent at the end of September - above a minimum requirement of 9.63 percent set by the ECB but below the ECB’s suggested level of 11.18 percent.

The ECB sets the minimum core capital level for individual banks each year and Carige’s 2019 threshold is not yet known.

Carige’s troubles stem from decades of mismanagement and excessive influence of local stakeholders and are symptomatic of a widespread malaise among regional Italian banks, which a deep recession has exacerbated.

Carige is Italy’s last remaining large problem bank after Rome bailed out Monte dei Paschi di Siena in 2016 and bankrolled the rescue of two mid-sized lenders based in the Veneto region by Intesa Sanpaolo last year.

Shares in Carige gained 23 percent on Friday to 0.16 euro cents after an 18.75 percent drop on Thursday. (Reporting by Valentina Za; editing by David Evans)

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