Italy has sold a 25% stake in bailed-out Monte dei Paschi di Siena, raising €920m and advancing plans to re-privatise the world's oldest bank two years after a failed first attempt.
The sale testifies to Italian banks' clean-up progress which contributed to Friday's unexpected decision by credit rating agency Moody's to improve to "stable" the outlook on Rome's debt, the third largest public debt burden globally.
It also buys Italy time to seek a more permanent solution for its fifth-largest listed bank.
Strong demand led the Treasury to increase the offering size, initially set at 20%, and to limit to 4.9% the discount compared to yesterday's closing price for MPS shares of €3.07 each.
The Treasury had been ready to grant a discount of up to 6%.
MPS shares trade 50% above the €2 a share at which the bank a year ago pulled off a make-or-break capital raising, which cost Italian taxpayers €1.6 billion after they had shouldered the bulk of an €8 billion rescue in 2017.
Chief executive Luigi Lovaglio used money from last year's cash call to fund thousands of voluntary staff exits, bolstering income through cost cuts.
With rising interest rates driving Italian banks' profits to record highs, MPS has forecast net income would top €1.1 billion this year.
Further improving the bank's prospects, favourable court rulings in recent weeks have prompted MPS to downgrade as "remote" legal risks stemming from lawsuits which have forced it set aside large sums against damage claims.
BofA Securities, Jefferies and UBS Europe coordinated the accelerated bookbuilding, the Treasury said in a statement.
As part of the transaction, Rome committed not to sell more shares on the market for 90 days without the consent of the global coordinators, it added.
Commitments Italy agreed with European Union competition authorities at the time of the bailout bind Rome to eventually sell its entire 64% stake in the bank. This latest transaction, when settled, will reduce the stake to 39%.
Reuters was first to report in May that the Treasury was open to cutting its stake via a share sale on the market if conditions were favourable, as long as any significant new investor managed the holding in line with the national interest.
Economy Minister Giancarlo Giorgetti and Prime Minister Giorgia Meloni have repeatedly said the government would try to increase competition among banks with the privatisation of MPS.
This has raised the prospect of a potential deal with other mid-sized peers, namely Banco BPM and BPER Banca, Italy's third and fourth largest banks respectively.
Both banks have denied any interest in MPS. Two years ago heavyweight UniCredit sank the government's privatisation efforts, forcing Rome to seek more time from the EU.
The stake sale is seen as giving Italy more flexibility to pursue a long-term solution for MPS via a merger with a rival, after negotiations with UniCredit were complicated by an impending re-privatisation deadline.
Given the absence of interested buyers in the short term, the share placement emerged as the most likely option to reduce the state stake and demonstrate progress towards a re-privatisation.
