MILAN (Reuters) - Monte dei Paschi di Siena
The state-owned lender said net profit fell 46 percent quarter on quarter to 101 million euros (£89.91 million) hit by a loss from trading and financial liabilities.
Revenue fell 5 percent to 832 million euros, below the 870 million forecast by analysts in a Reuters survey.
Core capital at June 30 stood at 13.0 percent, down from 14.4 percent at the end of March, as rising political risks under Italy's new anti-establishment government hit the value of the bank's government bond holdings.
Monte dei Paschi, which suffered massive deposit flights in the crisis years, said it had added 4.1 billion euros in sight and time deposits from end-December.
Loans growth contributed to a 6.4 percent quarterly rise in the bank's income from lending.
The Tuscan bank received an 8 billion euro rescue package last year, which handed the state a 68 percent stake.
It is striving to turn round under Chief Executive Marco Morelli to improve its appeal for a potential buyer.
State aid can only be temporary under European Union rules and a merger would give Italy's government a way out.
Gross problematic loans fell to 19.8 billion euros at the end of June, after completion of its record 24 billion euro bad loan securitisation with help from a state-sponsored, privately funded bank support fund.
It said it expected to complete the sale of a portfolio of leasing and small-ticket bad loans for up to 3.7 billion euros by year-end and is in the process of selling 800 million euros of so-called 'unlikely-to-pay' loans.
(Reporting by Stephen Jewkes; editing by Jason Neely)