Former Monte Paschi executives acquitted in derivatives trial

By Emilio Parodi

MILAN (Reuters) – An Italian appeals court on Monday acquitted three former senior executives of Banca Monte dei Paschi di Siena in one strand of a long-running derivatives case, boosting earnings prospects for the state-owned lender.

Italy bailed out Monte dei Paschi (MPS) in 2017 and still owns 39% of the bank, after it raised 920 million euros ($989 million) last month by selling a 25% stake.

The state must eventually exit MPS’s capital in full due to European Union rules on state aid.

The appeals court verdict had been closely watched by MPS investors because an acquittal frees the bank from obligations towards plaintiffs seeking damages in connection to derivatives deals blamed for playing a part in the bank’s troubles.

MPS had set aside money against such legal risks, provisions which it can now release. The bank did not provide a figure for the provisions, but MPS said in its latest financial statement that it faced more than 5 billion euros in legal claims as of Sept. 30.

Its shares rose 2.5% by 1411 GMT, outperforming a flat Italian banking index.

Milan’s appeals judges acquitted former MPS Chairman Alessandro Profumo and former Chief Executive Fabrizio Viola, as well as the former head of statutory auditors Carlo Salvadori, saying there was no case to answer.

“I never lost my trust in the judicial system, I’m happy for the bank,” said Profumo, a veteran Italian executive previously at the helm of both UniCredit and Leonardo.

Losses on the derivatives deals, together with those MPS suffered during the euro zone debt crisis, have threatened to destabilise Italy’s financial industry and triggered the Tuscan lender’s 8 billion euro ($8.6 billion) bailout in 2017.

Profumo and Viola had each been handed a six-year jail sentence by a lower court for allegedly incorrectly booking the two derivative deals known as Santorini and Alexandria, between 2012 and 2015.

Salvadori had received a three-and-a-half year sentence.

The main trial on these same deals related to the booking of the deals in the bank’s accounts between 2009 and 2011.

That case ended on Oct. 11 when Italy’s highest court acquitted all 15 defendants, as well as advisers Deutsche Bank and Nomura, which had arranged the deals for MPS in 2009.

The deals were alleged to have helped MPS hide losses racked up after the ill-advised acquisition of a smaller rival in 2008, on the eve of the global financial crisis.

Milan prosecutors had asked in 2018 for the Viola-Profumo case to be dropped, saying the three executives had followed accounting guidelines from regulators in booking the deals, but a judge rejected the request and sent them to trial.

($1 = 0.9296 euros)

(Reporting by Emilio Parodi, editing by Valentina Za and Jane Merriman)