Banca Monte dei Paschi di Siena’s return to profitability is credit positive
Last Friday, Banca Monte dei Paschi di Siena, S.p.A. (MPS, B1/B3 negative, caa13 ) reported a €188 million first-quarter 2018 profit after six quarters of losses.4 The return to profitability came as MPS reduced its stock of problem loans5 through a combination of securitizations and asset disposals that sharply decreased loan-loss provisions (see exhibit), which had driven large losses and culminated in the bank’s bailout by the Italian government in 2017. The improvement in the bank’s asset risk profile and earnings generation is credit positive, although we will need more evidence pointing to the bank’s long-term viability on a standalone basis.