Shares in Italy's troubled Banca Monte dei Paschi di Siena (BMDPY) on Monday continued their stellar week-long rally, adding 12.7% on expectations that the board of the world's oldest bank will approve a bailout plan to raise new equity and sell bad loans.

Monte dei Paschi shares have now added 78% since reports emerged last Monday that new CEO Marco Morelli had won support for a €5 billion ($5.44 billion) capital increase and the sale of €28 billion of soured loans. Monte dei Paschi is due to present its 2016 to 2019 business plan and quarterly earnings on Tuesday.

Morelli's blue-print is one of two plans that Monte dei Paschi's board will consider on Monday, according to reports in the Italian press. A second, formulated by Italy's former economic development minister, also calls for a €5 billion capital increase.

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Cash will be used to bolster Monte dei Paschi's balance sheet. The bank was found to be Europe's most at-risk lender in stress tests conducted in July by the European Bank Authority. Stabilizing Monte dei Paschi will have knock-on effects for other Italian lenders, which are systematically vulnerable to their rival and have also been suffering from a confidence deficit as a result of their significant exposure to non-performing and underperforming loans.

Morelli joined Monte dei Paschi from Bank of America (BAC) - Get Report last month after the board ousted former CEO Fabrizio Viola when investors sent shares in the bank lower after he presented his bail out plan.

Morelli's plan likely includes a debt-for-equity swap, a €1 billion sale of shares reserved for existing investors and €2.5 billion of new investment from industrial backers. It will also include significant cost cutting, including the removal of about 3,000 jobs, according to a report in Italy's Il Mesaggero newspaper. The sale of the bad loans portfolio would raise a little over €9 billion based on the loans net market value.

A new capital increase would be Monte dei Paschi's within about two years in as many years after it raised €8 billion selling equity from share issues in 2014 and 2015. The bank also received two state bailouts in 2009.

Monte dei Paschi shares traded Monday morning in Milan at €0.305. Despite their sharp gain over the past week they remain 82% down over the past year. Shares in Italy's biggest lender, Intesa Sanpaolo, (ISNPY) rose 1.7% on Monday, while its closest rival, UniCredit, (UNCFF) gained almost 2%.