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Monte dei Paschi back in the black

November 7, 2017

Italy's debt-ridden lender Monte dei Paschi di Siena has reported a net profit, signaling it's seeing better times after being rescued from the brink of collapse. A debt swap helped the bank return to the black.

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Monte dei Paschi bank
Image: Getty Images/AFP/A. Solaro

The world's oldest bank on Tuesday reported a third-quarter profit of €242 million ($280 million), returning to positive territory after a run of heavy losses and a state bailout that prevented the lender from collapsing.

A year earlier, Monte dei Paschi di Siena (MPS), now Italy's third-largest bank, logged a loss of around €1.2 billion as a result of mismanagement, a derivatives scandal and non-performing loans.

Now controlled by the Italian government, MPS has seen its core capital adequacy ratio rebound to 15.2 percent, one of the nation's highest.

Trend reversal

The lender had suffered heavy deposit outflows before the bailout, but has now managed to add €1.6 billion in fixed-term deposits and current accounts since the end of June.

Monte dei Paschi's quarterly profit would not have been possible without a €554-million gain on a debt-to-equity swap carried out as part of the bank's rescue plan.

The swap followed eurozone rules requiring that private investors suffer losses before any state aid is approved.

MPS booked €175 million in loan write-downs in Q3, bringing the total for the first nine months of the year to roughly €4.8 billion.

Italian goverment saves Monte dei Paschi

hg/jd (Reuters, dpa)