Salvini Says Bailed-Out Paschi Has Future as Standalone Bank

(Bloomberg) -- League party leader Matteo Salvini said bailed-out lender Banca Monte dei Paschi di Siena SpA can thrive on a standalone basis by combining with its smaller Italian peers.

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The world’s oldest bank, which has had to be rescued repeatedly by the state, “now has the capability to stand on its own two feet and be profitable,” Salvini, a leader of the right-wing coalition expected to win this weekend’s elections, said in an interview Monday. The lender can become “the hub of a number-three banking group” by linking up with cooperatives and mutual lenders, he said.

Siena-based Paschi is seeking to raise 2.5 billion euros ($2.5 billion) in new equity and cut about 4,000 jobs. Italy’s government failed to meet a European Union deadline to divest its controlling stake by the end of last year, after talks to sell the troubled bank to UniCredit SpA collapsed.

Salvini, who was vocally critical of the plan to sell the lender to Milan-based UniCredit, said in the interview that “Italy lacks a banking group focused on small and mid-sized firms,” the types of enterprises that have traditionally supported the League. A reformed Paschi could fill that void if given time to restructure, he said.

Paschi has been a financial burden for the government since it was first bailed out in 2009, in the wake of a spiraling crisis of souring loans and derivatives deals that backfired. Paschi has struggled to deliver consistent profits, particularly given its limited room for maneuver under terms the EU set in exchange for its nationalization in 2017.

A successful capital increase, set to start in mid-October, would be vital for revamping the bank and allowing the government to exit its stake.

Maurizio Leo, a top economic adviser to right-wing coalition leader Giorgia Meloni, has called for a delay in the bank’s capital-raising, arguing that the plan should wait until a new government is in place.

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