August 3, 2018 / 5:17 PM / 4 months ago

Carige CEO says arguments must stop for bank to tap markets

(This August 2 story corrects to read Sept 20 (not Sept 14) in paragraphs 12, 14)

By Valentina Za and Andrea Mandala

MILAN (Reuters) - The head of Banca Carige (CRGI.MI) said on Friday the mid-sized Italian bank will have to solve a governance crisis before it can tap markets to rebuild its capital as demanded by supervisors.

Chief Executive Paolo Fiorentino, however, said the bank could lift its total capital close to a minimum regulatory requirement by the end of the year even if it remained unable to issue a hybrid bond.

Boardroom conflicts have thrust Carige, Italy’s last remaining large problem bank, into the spotlight, putting at risk a turnaround which was just starting to bear fruit.

The European Central Bank has given Genoa-based Carige until the end of the year to close a capital shortfall, or to start seeking a merger with a stronger peer.

Carige, Italy’s 10th largest bank, is betting on asset sales to boost its total capital ratio to 13 percent, up from the current 11.9 percent and close to a 13.125 percent threshold set by the ECB.

“With just a 12 basis point gap I feel we will have done our homework ... and by no longer arguing we can maybe find someone who has confidence in us and buys a 200 million euro bond, which would not surprise me,” Fiorentino told analysts.

Carige must rebuild its second-tier capital after using its hybrid debt as part of capital raising measures in December.

But a string of resignations in recent weeks has laid bare a clash between Fiorentino and top shareholder Vittorio Malacalza, who built a 20.6 percent stake in Carige, spending 377 million euros to back three successive cash calls since 2014.

Fiorentino took over as CEO a year ago after Malacalza pushed out his last two predecessors.

Malacalza last month said current top management could not continue to lead Carige, prompting the ECB to take aim at the bank’s frequent management changes.

Malacalza, who was Carige’s deputy chairman and then its chairman by default when Giuseppe Tesauro stepped down in June, said on Friday he was bringing forward his resignation from the role with immediate effect.

He had previously resigned with effect from a shareholder meeting on Sept. 20 that will appoint a new board.

On that occasion, Malacalza is expected to face off rival investor Raffaele Mincione, an Italian financier who this year bought an initial 5.4 percent stake in Carige.

Mincione backs Fiorentino and is campaigning to win over other investors, sources have said, but it is still unclear who will back his slate of board nominees at the Sept. 20 meeting.

Carige reported a 27 million euro loss for the second quarter on Friday.

Reporting by Valentina Za

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