Stock market suspends UniCredit as bank sustains huge losses
SHARES in Italian bank UniCredit were suspended five times on the Milan stock exchange yesterday as investors kept selling following the bank's announcement of a heavily discounted €7.5bn rights issue the previous day.
Italy's largest bank by assets saw shares fall 17pc yesterday, taking the two-day declines to more than 30pc as investors reacted to a capital increase meant to shore up its ravaged balance sheet.
The shares closed at their lowest since the bank was created from the merger of several Italian lenders in 1998, dragging down the broader European banking index. Italian market watchdog Consob said it was probing the share move to check whether its ban on short selling in financial stocks had been respected.
UniCredit plans to offer new shares at a 69pc discount, which is much larger than that used by its peers in recent rights issues.
Chief executive Federico Ghizzoni, said he was confident the market would take up nearly all of the rights issue which is the biggest by a European bank in more than a year and a litmus test of market appetite for banking stocks in the new year.
"I'm optimistic," he told a newspaper. The capital increase is guaranteed by a consortium of banks. Mr Ghizzoni said some large US investors had reduced exposure to Europe in the last few months due to sovereign risks.
"But we still have important US and Anglo-Saxon funds among our shareholders and many have shown an interest in investing," he said.
The crash in UniCredit's shares spread to other banks as investors fretted that more lenders would need to follow its example to meet tougher European Banking Authority (EBA) capital requirements by the end of June.
The European banking stock index fell 4.35pc, with Italian banks among the biggest losers. Deutsche Bank shares dropped 5.6pc as traders cited talk that Germany's biggest lender needs to raise cash.
"Bank recapitalisations are the main worry on investors' minds all over Europe. All banking stocks are suffering," a Milan-based trader said.
Under tough new European banking regulations aimed at bolstering capital, UniCredit needs to raise €8bn, a capital shortfall smaller only than Spain's Santander.
The EBA has told Deutsche it must find €3.bn to reach a core capital level of 9pc by June. Deutsche has said it can do this organically.