Monte dei Paschi share price drops nine per cent on reports rescue plan is floundering

Caitlin Morrison
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Monte dei Paschi investors appear to be nervous about the rescue plan (Source: Getty)

Shares in troubled Italian bank Monte dei Paschi dropped by more than nine per cent this afternoon, on reports that a rescue plan could be about to fall apart.

The bank is trying to resolve its differences with a key investor over its €5bn (£4.2bn) rescue plan so as to avoid a state bailout, Reuters reported.

Today, Monte warned Italian bailout fund Atlante was rethinking its €1.5bn purchase of bad loans, after expressing "deep reservations" about the terms of a bridge loan that Monte secure as part of the purchase, in a letter dated 17 December.

"If issues raised by [Atlante's manager] Quaestio cannot be solved, the operation could not be concluded by 31 December, 2016 as requested by the European Central Bank," the bank said in a statement.

Italy's third-largest bank has until the end of December to raise capital and offload €28bn in gross bad loans as requested by European Central Bank supervisors.

Yesterday, the bank extended its share offer period for retail investors until Wednesday, and until Thursday for institutional investors.

Retail investors in Italy will be able to purchase 35 per cent of the shares, while the other 65 per cent will be reserved for institutional investors from around the world.

At the beginning of December, Monte's shares soared on reports that the Italian government was preparing to step in and take a controlling stake in the company.

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