Investment banks to earn a pretty penny off back of Monte dei Paschi rescue deal

Hayley Kirton
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Monte dei Paschi performed poorly in the recent European stress tests (Source: Getty)

Investment banks are expected to pocket big fees from a proposed emergency plan for Italian lender Monte dei Paschi di Siena.

The troubled bank recently revealed it was ironing out a €5bn (£4.2bn) rescue deal to bolster its capital with the help of Mediobanca and JP Morgan, although the deal is still tentative and may yet fall through.

However, sources have told Reuters the investment banking giants could take home €250m in underwriting fees should the deal go through, while Monte dei Paschi has already paid out almost €400m for capital hikes over the past two years.

Monte dei Paschi and Mediobanca have not responded to City A.M.'s request for comment at time of writing. JP Morgan has declined to comment.

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Monte dei Paschi was the worst performing bank in the European Banking Authority's stress test results last month, which showed the troubled lender's capital buffer would be entirely wiped out in the event of a sharp economic downturn.

Although there were other poor performers among the tested banks, including compatriot Unicredit and UK's RBS, Monte dei Paschi was the only one to be bankrupted in the most adverse scenario tested.

Italy's banking sector is thought to be burdened with around €360bn in non-performing loans and it has been widely speculated Italian Prime Minister Matteo Renzi has been trying to arrange a sizeable capital injection for the industry, even though this would involve going around EU law.

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However, Renzi recently took to CNBC to point out the banking industry's problems were widespread across Europe and not just limited to his country, adding that Intesa Sanpaolo stood out as one of the leaders of the pack in the recent stress tests.

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