UCG Unicredit Spa

Italy's largest bank UniCredit SpA (UCG.MI) won't pour additional money in a backstop fund to help other Italian lenders overloaded with bad loans, said Chief Executive Jean Pierre Mustier.

In an interview with Il Corriere della Sera published Thursday, Mr. Mustier confirmed that the lender will honor its commitment to the fund Atlante--the fund orchestrated by the Italian government earlier this year and financed by Italian banks, insurers and pension funds. But he added that it is a "one-off commitment and there won't be anything else."

"We drew a line," Mr. Mustier said. "Our shareholders, our clients don't give us money for activities that are not linked to UniCredit."

The Italian banking system is overloaded with bad loans--totalling 360 billion euros, according to some estimates. One of the worst-off banks is Monte dei Paschi di Siena but Mr. Mustier stressed that UniCredit won't do anything else to support it.

With the European Banking Authority's stress tests approaching--and Monte dei Paschi di Siena seen as the likely worst performer--the bank is seeking a solution to clean up its books and raise capital.

Atlante is expected to take the worst-performing loans of the bank, while private investments funds will take the better-quality loans. Meanwhile, Banca Monte dei Paschi would raise as much as EUR5 billion in capital to avoid a bailout by the Italian government. The plan is now subject to the European Central Bank's approval.

Write to Manuela Mesco at manuela.mesco@wsj.com

(END) Dow Jones Newswires

July 28, 2016 04:26 ET (08:26 GMT)

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