Monte dei Paschi beats profit forecast, strengthens capital

In a surprise move, state-owned Monte dei Paschi di Siena revealed stronger-than-expected third-quarter earnings thanks to a boost from higher rates, becoming the latest Italian bank to do so.

Monte dei Paschi (MPS) is 64% owned by the state, which is working on reducing its stake in the Tuscan lender in line with re-privatisation commitments taken with the European Union.

Net income in the three months through September came in at 310 million euros ($331 million), well above a 238 million euro average forecast in an analyst consensus gathered by the bank.

Income from the gap in lending and deposit rates, or net interest income, rose 60% year-on-year, surpassing analyst forecasts and more than offsetting slightly weaker net fees.

MPS said fees had suffered because of traditionally slower activity in the summer months, but also due to a decision to cut the costs of current accounts.

High-street banks in Italy have been able to keep at a minimum the portion of the increase in official rates they pass onto depositors. In many cases the so-called pass through on deposits is below 25%.

Several lenders, like MPS, have opted to cut service costs for account holders.

MPS said its core capital ratio had strengthened further in the quarter to 16.7%, above expectations and up from 15.9% at the end of June.

($1 = 0.9363 euros)

(Reporting by Valentina Za; editing by Robert Birsel)