The logo of Monte dei Paschi di Siena bank is seen in a bank entrance in Rome, Italy August 16, 2018. REUTERS/Max Rossi/File Photo

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MILAN, Aug 5 (Reuters) – State-owned Italian bank Monte dei Paschi di Siena (MPS) (BMPS.MI) posted a 17.5 million euro ($18 million) second-quarter net profit after loan writedowns needed to ease disposals.

Net profit was up from 9.7 million euros in the first quarter, despite weaker net fees due to tough markets and a much smaller contribution from the trading income.

MPS said it had agreed to sell impaired loans worth 900 million euros, allowing it to cut problem debts as a share of total lending to 3.9%.

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The reduction of bad debts is among fresh restructuring commitments Italy agreed this week with the European Commission when it secured a years-long extension of an initial end-2021 deadline to re-privatise MPS.

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

MPS said more banks had joined the guarantee consortium.

BofA, Citi, Credit Suisse and Mediobanca have signed a preliminary agreement to pick up any unsold shares in the cash call, but the underwriting contract is subject to clauses, 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 lending margin, which rose 4.3% quarter-on-quarter and 12.8% from a year ago.

($1 = 0.9777 euros)

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Reporting by Valentina Za; editing by Agnieszka Flak

Our Standards: The Thomson Reuters Trust Principles.

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