October 31, 2017 / 8:23 PM / a year ago

Italy's Carige posts 55 mln euro loss on bad-debt disposal

MILAN (Reuters) - Italy’s Banca Carige (CRGI.MI) posted a 55 million euro (48.24 million pounds) third-quarter loss on Tuesday, hit by a bad loan disposal required to comply with regulatory demands.

Cost cuts enabled the Genoa-based lender to record an operating profit of 5.4 million euros in the three months to Sept. 30 despite shrinking revenue, but it lost 111.5 million euros on the sale of 940 million euros in bad debt.

The government rescued larger rival Monte dei Paschi di Siena (BMPS.MI) and liquidated two failing regional banks this year, leaving Carige as the last large Italian bank still in difficulty after a deep recession.

The European Central Bank (ECB) has given it until the end of December to strengthen its capital and Carige is about to launch a share issue for up to 560 million euros after successfully completing a debt-conversion offer this month.

The bank said its CET1 capital ratio — a key measure of financial strength — stood at 10.4 percent at the end of September, below the ECB’s recommended 11.25 percent threshold.

Carige agreed on Tuesday to sell a building near Milan’s Duomo square, which will lift the CET1 ratio to 10.9 percent.

The ECB also wants Carige to cut its problematic loans to 5.5 billion euros by the end of the year and to 3.7 billion euros in 2019.

The bank said it held 6.3 billion euros in soured loans at the end of September after the disposal, with provisions against losses covering 46 percent of their value.

The bank is working on a further 1.4 billion euro sale under new CEO Paolo Fiorentino, who took over in June after the bank’s top shareholder pushed out his predecessor a little more than a year into the job.

Carige said in September that it would close 120 branches and cut about 1,000 staff while revamping its business model to return to profit from next year, lifting its return on tangible equity to 1.2 percent then from a negative 12.2 percent in 2016.

Reporting by Valentina Za; Editing by David Goodman

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