Five years after a bailout that handed the state a 64% stake, MPS needs more money to cut costs by shedding thousands of staff through costly early retirements, and to replenish its capital buffers.
Chief Executive Luigi Lovaglio is working to launch the new share issue in the middle of October, soon after national elections but before a new government is formed. It will be the seventh cash call in 14 years for MPS.
Stagflation fears roiling financial markets complicate Lovaglio's task, with MPS unable to offer a sufficient discount on its new shares after it lost 60% of its market value this year.
Lovaglio, a respected former UniCredit executive whom the Treasury recruited in February after failing to sell MPS to UniCredit, has secured a pre-underwriting accord with a group of eight banks led by Bank of America, Citi, Credit Suisse and Mediobanca.
The underwriters have the right to walk away if feedback from investors is negative. A person close to the consortium said the banks would assess the market situation after investor meetings Lovaglio is due to hold in London next week.
MPS' commercial partners, asset manager Anima Holding and insurer AXA, are open to discussing providing capital to the Tuscan bank in exchange for a strengthening of their commercial agreements, people familiar with the matter have said.
Anima could be willing to contribute up to 250 million euros, one of the people said. News of Anima's support have lifted MPS shares this week and its subordinated bonds, which had been hit by fears of conversion into equity.
Lovaglio has refrained so far from tabling discussions with either Anima or AXA because stronger commercial ties would make it harder for MPS to seek a merger partner in the future to allow Rome to cut its stake.
After the collapse of the UniCredit talks, the Treasury has secured from the European Union a years-long extension of an end-2021 deadline to re-privatise MPS.
($1 = 1.0026 euros)
(Reporting by Silvia Ognibene in Siena and Valentina Za in Milan; Editing by Keith Weir)