Italian bank MPS studies bid defence options after beating profit forecasts

By Valentina Za

MILAN, Aug 7 (Reuters) - Italian bank Monte dei Paschi di Siena (MPS) raised its 2026 profit outlook on Friday after quarterly earnings beat expectations, adding that it was considering ways to fend off a takeover bid from rival Intesa Sanpaolo.

"The objective is clear," MPS Chief Executive Luigi Lovaglio said. "To identify the optimal paths that maximize value for ... stakeholders while preserving the integrity of the franchise."

Breaking up the commercial network, as Intesa plans to do by selling half of MPS branches to insurer Unipol to solve antitrust problems, would destroy value, Lovaglio said.

Quizzed by analysts about options, Lovaglio said it was like a puzzle in which pieces still need to fall into place.

FINANCIAL STRENGTH AND 'STRATEGIC FLEXIBILITY'

Bailed out by the state in 2017 and reprivatised in 2023/24, MPS dominated the consolidation wave that swept Italian banking last year by managing to buy larger peer Mediobanca.

In June it became a takeover target for Intesa, which is preparing to launch a €36 billion ($42 billion) cash-and-shares bid.

With a core capital ratio of 16.3% at the end of June, almost seven percentage points above regulatory requirements, MPS said it had "strategic flexibility" in its defence.

To give investors a valid alternative to Intesa's offer, which includes a €3 billion cash payment, MPS could pay out some of its own cash reserves or sell a €9 billion stake in insurer Generali, the Italian press has speculated.

Any decision requires shareholder clearance under Italian takeover rules.

Lovaglio has previously described the Generali stake, which MPS acquired through Mediobanca, as a mere "nice to have". He said many other players regarded it as such. 

MPS, Italy's third-largest lender, reported net profit for the three months to June 30 of €610 million, far above a €543 million consensus analyst estimate gathered by the bank.

The bank raised its full-year pretax profit forecast to more than €3.6 billion, against its previous projection of more than €3.5 billion.

The bank's defensive strategy suffered a blow a week ago when Banco BPM said it was abandoning a potential tie-up project. BPM had rushed to invite MPS to merger talks just as Intesa prepared to unveil its bid.

Asked if the BPM chapter was closed, Lovaglio said the best MPS could do was to be ready to catch the winds that "sometimes carry you towards new destinations, sometimes bring you back to ports from which you had previously sailed away".

($1 = 0.8678 euros)

(Reporting by Valentina ZaEditing by David Goodman)