Monte dei Paschi see-saws as Italian bailout looms

Italian crisis bank Monte dei Paschi saw its shares gyrate wildly today as the clock ticked down towards an all-but-inevitable state bailout.

A private €5 billion (£4.2 billion) rescue led by JPMorgan for the world’s oldest bank, founded in 1472, has failed, leaving it forced to tap a €20 billion rescue pot agreed by the Italian government.

The state, which is a 4% shareholder, could eventually take a majority stake in the troubled lender.

Paschi’s shares sank as much as 7% today before recouping their losses to stand 3% higher as markets digested the looming rescue.

The bank, Italy’s third-biggest lender, raised just €2.5 billion in a debt-for-equity swap, forcing it into the arms of the state.

The Italian banking system is saddled with some €360 billion in bad loans, but Paschi made itself particularly vulnerable with a major acquisition on the brink of the financial crisis.

Italian reports suggested the bailout could take up to three months to complete with the bank using state guarantees to keep afloat before being recapitalised through the fund to support the country’s weakest banks.

Italy’s blue-chip FTSE MIB rose 0.5% with fellow banks Intesa Sanpaolo and UniCredit rising alongside Paschi.