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Monte dei Paschi mulling higher provisions after court ruling - sources

Credit: REUTERS/Alessandro Bianchi

State-owned bank Monte dei Paschi (MPS) is considering raising provisions for legal risks after its former CEO and chairman were convicted last week in a false accounting case, two sources familiar with the matter said.

By Giuseppe Fonte and Valentina Za

MILAN, Oct 20 (Reuters) - State-owned bank Monte dei Paschi (MPS) <BMPS.MI> is considering raising provisions for legal risks after its former CEO and chairman were convicted last week in a false accounting case, two sources familiar with the matter said.

Thursday's ruling by a Milan court is the latest blow for the loss-making bank which the Treasury is trying to re-privatise after spending 5.4 billion euros ($6.4 billion) in 2017 for a stake now worth less than 1 billion euros.

Laid low by years of mismanagement, MPS has set aside cash covering only a fraction of around 10 billion euros in claims it faces mainly from investors left out of pocket by a string of cash calls over the past decade.

The bank booked 357 million euros in provisions against legal risks in the second quarter and the two sources said it was likely to put aside more money in the third.

MPS shares gained 1.3% on Tuesday.

The lender reports quarterly earnings on Nov. 5.

One of the sources said a board meeting may be convened before then to discuss hiking provisions, potentially by more than 500 million euros.

Daily la Repubblica first reported news of the additional provisions.

Activist investor Bluebell Partners has asked Italian prosecutors to check first-half earnings comply with accounting standards complaining provisions are too low, a document seen by Reuters showed.

Former MPS Chairman Alessandro Profumo, former CEO Fabrizio Viola and former Supervisory Board President Carlo Salvadori were convicted last week of not correctly booking two derivative transactions - known as Alexandria and Santorini - between 2012 and 2015.

The defendants have said they will appeal the sentence. Under Italian law, verdicts can be appealed twice, in which case they become final only after the third-instance trial.

Italian PM Giuseppe Conte gave the final green light at the weekend to measures paving the way for a bad loan clean-up at MPS and the eventual sale of the state's stake.

($1 = 0.8466 euros)

(Reporting by Giuseppe Fonte and Valentina Za; Editing by Alexandra Hudson)

((valentina.za@tr.com; +39 02 6612 9526;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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