MILAN — A “run” has begun on Italian Banks, with Depositors taking out money in a PANIC, fearing they will lose everything if they leave their money deposited.
Banca Monte Dei Paschi di Siena SpA’s shares shed one-fifth of their value after plunging for a third consecutive day Wednesday, as the bank scrambled to reassure investors its finances are solid.
The bank said that it had suffered an outflow of deposits as a result of market jitters and that its accounts had improved in the last quarter.
The bank’s Chief Executive Fabrizio Viola said in a statement that deposit outflows were limited and lower than those that had taken place in 2013.
In February 2013, it emerged the bank was entangled in a legal scandal involving loss-making complex financial transactions, something that spooked investors and caused a deposit-outflow of “some billions,” the bank said in April that year.
But Mr. Viola’s words didn’t stop the massive selloff.
Trading in the bank’s shares was suspended for most of Wednesday’s session and shares ended up shedding 22.2%. Since Monday, the bank’s shares have lost 46% of their value, plunging to €0.51 ($0.56) per share. Since the beginning of the year, the bank’s share price has declined 58%.
The bank is now capitalized at roughly €1.6 billion, despite having tapped investors for €8 billion in the last two years to pay back a €4 billion government loan and shore up its capital position, amid mounting bad loans and a chronic lack of profitability.
“It’s pure panic, we are going beyond the prospects of the bank’s low profitability,” said Vincenzo Longo, a strategist at IG Markets in Milan.
The bank will post fourth-quarter earnings on Feb. 5.
In 2012, the bank started to implement a drastic restructuring plan, aimed at bringing it into the black and to pay back a €4 billion government loan. For the first half of last year, the bank posted a net profit of €194 million, after having accumulated losses of over €10 billion in earnings periods since the second quarter of 2012.
But it posted a €109 million loss for the third quarter, mainly due to a one-off hit caused by the unwinding in September of a complex structured-product transaction.
It also tapped investors for €8 billion in the last two years to pay back a €4 billion government loan and shore up its capital position, amid mounting bad loans and a chronic lack of profitability.
Meanwhile, UniCredit SpA’s Chief Executive Federico Ghizzoni ruled out any intervention to support Monte dei Paschi, adding that he had received no requests from the Italian government to do so.
Sources in the financial markets throughout Europe have confirmed to SuperStation95 that “These bank runs will spread” to other countries, with one analyst saying “This is the beginning of the end for all of Europe.”
If those analysts are correct, then the contagion could spread to the United States. Will YOU be one of the people who leaves his money at a bank while it fails? How will you eat if that happens? How will your family eat?
