MILAN (Reuters) - Italy's Monte dei Paschi di Siena is set to appoint Marco Morelli as its new chief executive on Wednesday, handing the 54-year-old banker the tough job of convincing investors to back a third cash call in as many years.
Monte dei Paschi emerged as the weakest lender in Europe in industry stress tests in 2014 and again in July and the government of Prime Minister Matteo Renzi has made helping the bank a priority.
A full-blown crisis would destabilise the country's lenders and the government itself, sending shock waves through the entire euro zone which is still reeling from Britain's June vote to leave the European Union.
Morelli is currently head of Bank of America (NYSE:BAC) Merrill Lynch in Italy. He worked at Monte dei Paschi until 2010, both as deputy general manager and chief financial officer, before joining rival Intesa Sanpaolo (MI:ISP).
The Rome-born banker has previously worked at JP Morgan, the investment house that is jointly leading the banking consortium underwriting the planned share issue.
Morelli emerged as the front runner to replace the outgoing CEO immediately after Monte dei Paschi announced last Thursday that Fabrizio Viola had agreed to step down.
The Tuscan lender, which is worth just 670 million euros (570 million pounds) after its shares plunged 81 percent this year, needs to raise 5 billion euros as part of an emergency plan which also includes a record 28 billion euro sale of loans made to insolvent borrowers.
Bankers have told Reuters it would have been difficult for Viola -- who arrived in 2012 to turn the bank around and oversaw two cash calls raising 8 billion euros -- to drum up support from investors for a new share sale.
The change at the top is likely to delay the presentation of Monte dei Paschi's new business plan which had been due at the end of September.
The share sale is also likely to be put back until after a referendum on constitutional reform on which PM Renzi has staked his political future.
With the vote set to take place by early December, Monte dei Paschi could tap markets in January or February, a source close to the matter said last week.
Monte dei Paschi faces competition in its search for fresh cash from healthier rival UniCredit which is also expected to raise capital under new CEO Jean Pierre Mustier.
Unlike Spain or Ireland, Italy did not move to help its banks during the financial crisis. But when a harsh recession saddled lenders with 360 billion euros in soured debts, Rome found itself with little room for manoeuvre due to new stricter rules on bank bailouts.
