Teetering Italian bank looks for investors

‘And its not very hard to see the Five Star movement take power with stated aims to either leave the European Union, drop the euro, or both’.

“If Italy can’t sort out its banks, then they will be in a real mess”.

The ratings agency delivered its verdict on the sector, which is weighed down with €360bn (£304bn) of bad debts amid attempts to find investors to inject up to €5bn into MPS, the world’s oldest bank.

This is where the good news ends, it is still looking for Euro 1bn in capital from the Qataris’, and without Doha as the anchor investor in this much-needed capital raising it is hard to see how Monte dei Paschi can avoid nationalisation. Markets expect the Bank of Italy and the European Central Bank to take steps, including making state aid available for the banking sector.

Why do Italian banks matter?

In UK stocks, t rain and bus operator Stagecoach was 2% ahead on the second tier after handing confidence to investors that it could hit its full-year targets despite seeing profits slip.

Financial experts are anxious a failure to buoy Italy’s third-largest lender may dent investor confidence in the country’s banking sector that is drowning in €360 billion of bad debt.

That in turn has delayed the formation of a new government, making it more hard to persuade investors to commit.

Sources have said bigger rival UniCredit CRDI.MI , Italy’s biggest bank by assets, will wait until February 2017 before seeking to raise as much as 13 billion euros in a share issue.

They will meet on Monday afternoon to decide their response.

Leaving Renzi in charge would minimise political disruption, but accepting the task would amount to a major loss of face for the outgoing premier, who’d made it a point of honour to quit if beaten in December’s referendum on constitutional reforms.

Banca Monte dei Paschi di Siena SpA’s bondholders agreed to swap about 1.02 billion euros (US$1.1 billion) in subordinated notes for shares as the attention of investors shifts to whether the bank is able to attract investors to a stock offering.

“I simply don’t think the numbers are there to do it for Monte dei Paschi any way”.

Of Italy’s banks, Monte Paschi was seen as most vulnerable.

With European markets also posting new multi-month highs as well it would appear that the season of good cheer has come upon us early in the lead up to Christmas, and next week’s offerings from the US Federal Reserve.

LONDON, Dec 7 (Reuters) – Italian government bond yields fell back near three-week lows on Wednesday after reports the country is preparing to rescue ailing lender Monte dei Paschi with hopes of a private recapitalisation fading.