Banca Marche put under special administration

Italian lender Banca Marche has been placed under special administration by the Bank of Italy after posting a net loss of €232 million in the first half, due to big writedowns on its loan portfolio.

Smaller lenders such as Marche are bearing the brunt of Italy’s longest recession since World War II, with soaring bad debts stretching their finances, and some analysts say they will likely need to tap investors or ask for state aid to shore up their finances.

The bank, the target of an extended inspection by the Bank of Italy, said on Friday its Core Tier 1 ratio - a key measure of financial strength - had fallen to 4.29 per cent at the end of June, making it one of the weakest in Italy.

By comparison its bigger rivals such as UniCredit, Intesa Sanpaolo, UBI and Banco Popolare have ratios of between 9.5 and 11 per cent.

The bank had approved a €300 million share issue to be carried out by the end of this year, but said on Friday neither its current shareholders nor new investors had made a binding commitment to take part in the cash call.

The lender had also tried to place a bond for up to €100 million with a hefty 12.5 per cent coupon by the end of July. However, its Friday statement said the take-up for the bond so far was just €25 million.

The unlisted 312-branch lender said the Bank of Italy had temporarily suspended from their functions its board of directors and internal auditors and had appointed two special administrators who took office on Friday.

“The measure was taken also in view of the first-half results,” Banca Marche, in which Intesa Sanpaolo has a 5.8 per cent stake, said.

It added the special administrators would be tasked with putting in place the necessary steps to shore up the bank’s weak capital base.

Banca Marche said writedowns on loans totalled €451.8 million in the first half, or €373 million more than in the same period of 2012.

Problematic loans rose by 15 per cent and accounted for 24 per cent of total loans, it said.

The writedowns were €170 million higher than what the bank had forecast on Aug. 1 and were the result of an “extraordinary review” of the bank’s loan portfolio to meet the requests of the Bank of Italy, the lender said.

The Italian central bank, which has been carrying out an inspection of bad loans at 20 of the country’s banks, said at the end of July it had extended its checks to the entire loan portfolio of eight smaller lenders.

The closer scrutiny is meant to accelerate a clean-up of Italian banks' balance sheets before the European Central Bank takes over supervision of euro zone's lenders in 2014.

Banca Marche’s woes are likely to raise more questions over the role played by banking foundations - charitable entities with close ties to local politicians - in Italian banks after the scandal that engulfed Monte dei Paschi di Siena.

Reuters