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Intesa Sanpaolo to seek €4bn in state aid

March 20, 2009

By Guy Dinmore in Rome

Published: March 20 2009

Intesa Sanpaolo, one of Italy’s top two banks, announced Friday it would ask for €4bn ($5.4bn) in government support just days after Corrado Passera, its chief executive, denounced conditions attached to the scheme as “demagogic”.

Intesa follows UniCredit and Banco Popolare in seeking aid to raise its core tier one capital ratios, establishing a trend that some analysts said was likely to exceed the €12bn set aside by the Italian Treasury for the scheme.

Earlier this week Mr Passera reflected the private views of the banking community when he sharply criticised the government’s intention to give a credit monitoring role to Rome-appointed local officials.

The Bank of Italy has also attacked the move as a weakening of its authority.

Intesa’s request for help undermines the repeated claims by Silvio Berlusconi, the centre-right prime minister, that Italian banks were much more secure than their European peers and did not need government support.

Intesa on Friday posted a much larger-than-expected fourth-quarter loss of €1.23bn, against a €504m profit in the same period a year ago. The loss followed what it called aggressive writedowns intended to “start 2009 with a clean sheet”.

Its shares in Milan fell by as much as 6.5 per cent after the announcement but eventually closed 1.7 per cent higher on the day. Intesa said the €4bn funds it was seeking through the government-sponsored bond plan would help bring its core tier one ratio to 7.4 per cent. It also announced sales of non-core assets.

UniCredit said on Wednesday it would seek state aid totalling €4bn from the Italian and Austrian governments because of its exposure to central and eastern Europe. Banco Popolare said it would tap the bond scheme for €1.45bn. The Italian banking sector is relatively shielded from subprime mortgages. But it has a weak capital base, with core tier one ratios – a key measure of balance sheet strength – usually under 7 per cent.

The share prices of many banks have plunged to levels that analysts said would, in effect, force them to follow the lead of the first three.

Intesa was a key player in helping the government bail out state-owned Alitalia in January and eventually took a stake as part of a consortium of new private owners.

Analysts said Mr Passera’s service in helping Mr Berlusconi fulfil a campaign pledge to keep the airline in Italian hands would stand him in good stead.

Intesa also announced it would not pay a dividend for 2008 but said it hoped to pay one on 2009 results.

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