Italy seeks merger deal to cut public stake in Monte Paschi

By Giuseppe Fonte

ROME (Reuters) -Italy is looking a merger deal to further cut its stake in bailed-out lender Banca Monte dei Paschi di Siena (MPS), Economy Minister Giancarlo Giorgetti said, prompting the bank's share price to climb by about 7%.

After rescuing MPS in 2017 and gaining an initial 68% stake, Italy has cut its shareholding in recent months to just below 27% through two successive market placements, pocketing around 1.6 billion euros ($1.72 billion).

Giorgetti said on Wednesday the government wanted to follow for MPS "the same logic" it used for a tie-up between ITA Airways and Germany's Lufthansa, which was the main subject of the press conference.

"We want to do an industrial operation but under the right conditions for the state and the economy. The transaction will be done when these conditions are met, we are not desperate," Giorgetti said.

Sources close to the privatisation process have previously said the Treasury needs to cede control of MPS and eventually put the lender back into private hands by the end of this year to meet re-privatisation terms agreed with the European Union.

"The interest of the Italian economy is to have a plurality of banking hubs. The fact that there is (market) interest on Italy is not a bad thing," Giorgetti added, replying to a question about a possible foreign partner for MPS.

A first attempt to privatise the bank in 2021 proved fruitless as Italy's No.2 bank UniCredit walked away from merger talks with the Treasury, forcing Rome to seek more time from Brussels.

Since taking office in late 2022, Giorgetti and Prime Minister Giorgia Meloni have repeatedly said that the government would try to boost competition among banks with the privatisation of MPS, signaling a preference for a merger with another mid-sized lender.

That raised the prospect of a potential deal with Banco BPM or BPER Banca, Italy's third and fourth largest banks respectively, though both have said they were not interested in MPS.

In the absence of interested parties, the government may still use share placements to cut its stake as it did so far. A commitment not to sell more MPS shares since the last placement in March expired on July 2.

($1 = 0.9285 euros)

(Reporting by Giuseppe Fonte and Angelo Amante, editing by Crispian Balmer and Emelia Sithole-Matarise)