Paschi Reaffirms ‘Full Confidence’ for CEO Amid Mediobanca Probe

(Bloomberg) -- Banca Monte dei Paschi di Siena SpA renewed its support for Chief Executive Officer Luigi Lovaglio amid a probe into the bank’s takeover of Mediobanca SpA.

The lender’s board of directors “unanimously renewed its full confidence” in Lovaglio following an in-depth review, Paschi said in a statement late Friday.

Lovaglio is being investigated by Milan prosecutors for allegedly coordinating the Mediobanca acquisition with two influential investors — billionaire Francesco Gaetano Caltagirone and Delfin Sarl Chairman Francesco Milleri — according to documents previously seen by Bloomberg News. The trio failed to disclose their coordination to the market or relevant authorities, according to the documents.

Monte Paschi’s shares closed down 4.6% on the day of the searches and they have since extended the decline to about 13%.

Monte Paschi completed the €17 billion ($19.7 billion) acquisition of Mediobanca in September, in a deal backed by the Italian government under Prime Minister Giorgia Meloni. The two billionaire clans began building their holdings in Monte Paschi about a year ago when the government sold a part of its stake.

Lovaglio’s next challenge is implementing the merger and delivering on the cost-cutting targets outlined in the plan. The working groups, made up of staff from both banks, “are continuing to work at full capacity” to achieve synergies, Paschi also said in the statement.

Paschi said the acquisition will enable it to add wealth management operations and cut €300 million in annual costs. The enlarged bank would also be able to accelerate the usage of €2.9 billion in deferred tax assets to reap capital benefits. 

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