Italian police searched the offices of Banca Monte dei Paschi di Siena SpA, the world’s oldest bank, and its main investor as part of a market manipulation probe into the acquisition of Banca Antonveneta SpA.
The investigation, conducted by prosecutors in Siena, Italy, is focused on transactions to obtain financing to buy Antonveneta from Spain’s Banco Santander SA (SAN) in 2007, the prosecutor’s office said in an e-mailed statement today. In addition to alleged market manipulation, police are investigating obstruction of regulatory activity, according to the statement.
The alleged wrongdoing occurred between 2007 and 2012, the prosecutors said. Searches also were carried out today at foreign banks in Italy, according to the statement.
Monte Paschi will cooperate with the investigation, a spokeswoman for the bank said by phone. The probe is focusing on the sale of 1 billion euros ($1.3 billion) of so-called FRESH, hybrid securities sold in 2008 to finance the purchase of Antonveneta, she said, declining to be identified because of internal policy.
The investigation also involves possible market manipulation on Monte Paschi’s share price, a spokesman of Fondazione Monte dei Paschi di Siena said by phone. The foundation is fully cooperating with the probe and it acted with complete transparency, the spokesman said.
Prosecutors are reviewing unusual movements of the bank’s shares in early January, the spokesman said. Monte Paschi shares plunged 27 percent Jan. 3 to Jan. 9, compared with a 7 percent decline of the Bloomberg Banks and Financial Services Index.
Monte Paschi fell as much as 10.3 percent today, and closed down 7 percent to 23.3 cents in Milan trading. The bank, which has a market value of about 2.8 billion euros, has dropped 7 percent this year, compared with the 1 percent decline of the Bloomberg Banks and Financial Services Index.
Monte Paschi, Italy’s third-largest lender, paid 9 billion euros to purchase Padua-based Antonveneta from Banco Santander. The Italian bank sold 5 billion euros of new shares to pay for the deal, half of which was subscribed by Fondazione Monte Paschi.
“This acquisition definitively cost too much,” said Giulio Baresani Varini, head of wealth management at Millennium SIM in Milan. “Developments in the case will be followed closely by the market.”
Fondazione Monte Paschi, a non-profit foundation, sold a 12 percent stake in the lender last month to repay loans obtained to participate in the capital-raising transaction that financed Monte Paschi’s acquisition of Antonveneta. The foundation, which now owns 36.4 percent of the bank, spent almost 4 billion euros to buy shares in two Monte Paschi rights offers that raised about 7 billion euros from 2008 to 2011.
The foundation borrowed 490 million euros from Credit Suisse Group AG and Mediobanca SpA in 2008 to finance the purchase of the hybrid securities from Monte Paschi. It also obtained a 600 million-euro loan guaranteed by the bank’s shares with a pool of lenders to buy stock in Monte Paschi’ rights offer in 2011.
Police searched also the offices of Mediobanca because it’s “a subject informed about the facts,” a bank official said.
Monte Paschi has a capital shortfall of 3.3 billion euros, the European Banking Authority said in December. In March the bank reported a record 2011 loss of 5 billion euros because of writedowns related to acquisitions. The bank, which must also repay 1.9 billion euros of state aid provided in 2009, plans to sell assets and convert hybrid securities to bolster finances.
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