August 2, 2018 / 1:11 PM / 13 days ago

Italy's Poste tries to reassure investors after solvency ratio drops

MILAN (Reuters) - Poste Italiane tried to reassure investors on Thursday after the stock fell nearly six percent on a sharp drop in the solvency ratio of the Italian post office due to a sell-off in the country’s government bonds.

The former postal services monopoly, in which the Treasury and state lender Cassa Depositi e Prestiti are the main investors, is now a conglomerate whose insurance arm Postevita is a key source of growth.

The Rome-based group said Postevita’s solvency ratio, a closely watched measure of financial strength, fell to 185 percent at end-June from 279 percent at end-December mainly due to market volatility impacting Italian government bond holdings.

Italian government debt suffered increased volatility in the second quarter of this year as the yield spread between Italian and German government bonds widened with the formation of an anti-establishment government.

“We don’t see any impact on the group’s dividends from the drop in the ratio,” Tiziano Ceccarani, head of Poste’s planning & control, told analysts at a post-result conference call.

The group said that the current level of the ratio was

appropriate and added the holding company for the group would intervene to increase Postevita’s solvency if needed.

Some investors are wary that, after the summer break, tensions inside the government could emerge on the 2019 budget, hitting Italian debt again.

“If the group sees the level of provisions is not perceived as high enough by investors, we will move to reassure the market on the solvency ratio,” Poste CEO Matteo Del Fante said.

“If you consider that we are looking at a division (Postevita) which is part of a holding company that is under leveraged... the issue should be much, much, much less relevant.”

Poste Italiane held more than 130 billion euros in Italian government bonds at the end of last year.

In the first half of the year the group reported net income of 753 million euros (£670.8 million), beating a 711 million-euro analyst consensus published by Poste in its website.

Total revenue came in at 5.429 billion euros, down 1.3 percent compared with the same period of last year.

Shares in the group fell 5.26 percent at 1140 GMT underperforming a 1.8 percent drop in Milan’s blue-chip index.

Reporting by Francesca Landini, Editing by William Maclean

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