On Wednesday, the Italian state-controlled Monte dei Paschi di Siena (MPS) announced its plan to distribute dividends for the first time in more than ten years, following a remarkable fourth-quarter performance that surpassed analysts’ full-year profit expectations.
Monte Paschi Bank Announced Its First Dividend Payout in 13 Years
Alongside major Italian banks such as Intesa Sanpaolo (ISP.MI) and UniCredit (CRDI.MI), MPS has benefited significantly from the rise in interest rates. Additionally, the bank has gained from positive outcomes in several legal disputes with former executives, alongside ongoing restructuring efforts led by CEO Luigi Lovaglio.
Thanks to the favourable court decisions, the bank could reverse 466 million euros previously set aside for legal risks in the fourth quarter. This reversal contributed to a substantial fourth-quarter profit of 1.12 billion euros, marking a turnaround from the 178 million euro loss recorded in 2022.
Lovaglio has indicated that litigation risks are returning to normal levels, emphasising the importance of dedication and hard work in reaching significant milestones towards becoming a more transparent and simplified bank.
Appointed by the Rome government two years ago to lead the Tuscan bank after a 2017 bailout, Lovaglio, a seasoned banker from UniCredit, has been instrumental in the bank’s current achievements. The fourth quarter saw an improvement in revenues, including net fees, compared to the preceding quarter.
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Lovaglio has committed to increasing the bank’s pre-tax profit for the current year, excluding the impact of risk provision releases, and has raised the dividend payout ratio to 50% from 30%.
MPS, which is 39% owned by the state following a successful stake placement in the market last November, announced a dividend payout of 315 million euros, ahead of schedule and for the first time since 2011. By the midday trading, MPS shares had climbed 4% to 3.506 euros each.
Considering its distribution plans, MPS reported a core capital ratio of 18% of risk-weighted assets, surpassing the ratios of sector leaders UniCredit (16%) and Intesa Sanpaolo (13%). Lovaglio has dismissed the idea of using surplus funds for share buybacks, as done by Italy’s leading banks, focusing instead on potential partnerships while maintaining a capital ratio above 18%.
