January 9, 2019 / 5:12 PM / 5 months ago

RPT-UPDATE 1-Carige commissioner plays down nationalisation option

(Repeats to additional subscribers)

* Economy minister says market solution preferable

* Key elements missing before it can look for buyer

* Must reduce cost of hybrid bond, conversion an option

By Valentina Za and Andrea Mandala

GENOA, Italy, Jan 9 (Reuters) - A nationalisation of Banca Carige is not currently an option, a commissioner in charge of the ailing Italian bank said on Wednesday, although there is some support for such a step in the country’s ruling coalition.

Italy’s government has already set up a 1.3 billion euro($1.50 billion) fund to support Carige after the European Central Bank last week put the Genoa-based bank under temporary administration, following a failed attempt to raise capital from investors.

This marked an about-face for the ruling 5-Star Movement, which has criticised banking rescues handled by the previous government.

Pietro Modiano, one of the commissioners running the bank, on Wednesday dismissed the prospects of the state taking it over.

“A nationalisation is not on the table, it is not necessary ... it is a less than abstract possibility,” Modiano told a news conference.

Economy Minister Giovanni Tria also said on Wednesday a market solution for the banks was preferable.

But Five-Star leader Luigi Di Maio has said Carige will be nationalised if the state has to put any money in it. Prominent members of the League, the other partner in the ruling coalition, have also said nationalisation is a concrete possibility.

Claudio Borghi, a League politician who heads the Lower House’s budget committee, said combining Carige with state-owned Monte dei Paschi was an option.

Carige’s troubles stem from decades of mismanagement and too much exposure to the depressed local economy.

The ECB has pushed Carige to seek a merger with a stronger rival and finding a buyer is now one of the commissioners’ tasks.

Fabio Innocenzi, another of the commissioners now in charge of Carige, said the bank had not yet sounded out suitors because it needed first to stabilise its cost of capital and halve its bad loan burden to less than 10 percent of its total loans.

He said the bank would move fast on reducing bad debts so as to achieve some results in time for presentation of a new business plan on Feb. 26.

“We haven’t invited any expressions of interest yet ... we want to talk to potential buyers with our plan’s numbers in hand and not under a media barrage,” he said.

Carige has limited appeal, bankers say. It has had to sell its most attractive assets to survive and is overly exposed to the local economy which has been hit by a slump in the shipping industry.

Italian banks have already supported Carige’s capital position via a 320 million euro hybrid bond. But Carige is now negotiating with the banking fund that bought the bond to try to renegotiate the terms because it has a 16 percent coupon rate which could strain the bank’s finances.

Innocenzi said Carige had various options to achieve a reduction in the bond’s cost, including converting it into shares or booking it as part of its core capital.

The fund’s board met on Wednesday to discuss Carige’s proposal but did not reach a decision.

Innocenzi also said renegotiating the bond’s terms to achieve a cost of capital that was sustainable for the bank was a key pre-condition for Carige to start looking for a partner. ($1 = 0.8671 euros) (Additional reporting by Paola Arosio in Milan. Editing by Jane Merriman)

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