Monte dei Paschi posts quarterly profit as it strives to reduce bad debts

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MILAN, August 5 (Reuters)Public Italian bank Monte dei Paschi di Siena (MPS) BMPS.MI recorded a second quarter of 17.5 million euros ($18 million) net profit after credit impairments necessary to facilitate disposals.

Net profit increased from 9.7 million euros in the first quarter, despite lower net commissions due to difficult markets and a much lower contribution from trading income.

MThe PS said it had agreed to sell bad loans worth 900 million euros, which allowed it to reduce the share of problem debts in total loans to 3.9%.

The reduction in bad debts is among new restructuring commitments that Italy agreed this week with the European Commission when it secured a one-year extension to the original deadline of the end of 2021 to reprivatize MPS.

The Tuscan bank said it expected the European Central Bank to approve its proposed €2.5 billion capital increase in time for a shareholder vote on the new share sale on 15 september.

The MPS said more banks had joined the guarantee consortium.

BofA, Citi, Credit Suisse and Mediobanca have signed a preliminary agreement to collect all unsold shares on the cash call, but the subscription agreement is subject to covenants, including positive investor feedback.

In the first set of quarterly results under new chief executive Luigi Lovaglio, MPS joined rival Italian lenders in reaping the benefits of higher rates on its credit line, which rose 4.3% quarter-on-quarter and 12.8% compared to a year ago.

($1 = 0.9777 euros)

(Reporting by Valentina Za; editing by Agnieszka Flak)

((valentina.za@thomsonreuters.com; +39 02 6612 9526;))

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