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Italy's Monte Paschi swings to second-quarter loss of 845 million euros as COVID takes toll

The entrance of Monte Dei Paschi bank headquarters is pictured in Siena January 24, 2013. At the news conference on February 7, 2013, European Central Bank (ECB) President Mario Draghi can expect to be asked how much he knew about the derivatives scandal at Monte Paschi, and what he did about it when he headed Italy's central bank from 2006 to 2011. Picture taken January 24, 2013. REUTERS/Stefano Rellandini (ITALY - Tags: BUSINESS)

MILAN (Reuters) - Italy’s state-owned lender Monte dei Paschi di Siena swung to an 845 million euro (760.7 million pounds) loss in the second quarter due to one-offs including more loan writedowns prompted by the coronavirus pandemic and provisions for legal claims.

The bank said it had booked a further 107 million euros in loan writedowns in the quarter, along with writedowns of 476 million euros on deferred tax assets and 384 million euros one-off charges including provisions for legal claims.

The bank’s transitional CET1 ratio, an indicator of financial strength, stood at 13.4% at the end of June compared to 14.7% at the end of last year.

“The lockdown impacted us for most of the quarter,” CEO Guido Bastianini said in a conference call.

In June the lender approved a plan to offload around 8.1 billion euros in bad and unlikely-to-pay loans to state-owned bad loan manager AMCO.

The European Central Bank has told the Tuscan bank to strengthen its capital base by around 700 million euros to allow the soured loan spin-off, two sources close to the matter said last month.

The Italian government currently controls Monte dei Paschi with a 68% stake, following an 8 billion euro bailout in 2017 to save the bank from sinking under problem debts and the fallout from a derivatives scandal.

The bank said as of July 31 it had received further extra-judicial claims from the Fondazione MPS, a charitable foundation which used to control Monte dei Paschi and has seen its wealth vanish as the bank sank deeper into trouble, for 3.8 billion euros.

Overall extra-judicial claims total 4.8 billion euros, Monte dei Paschi said.

Reporting by Stephen Jewkes; editing by Valentina Za

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