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Huge €7.5bn rights issue by UniCredit sparks 14.5pc share slump

Italian bank UniCredit shares fell the most in 23 years in Milan after it launched a €7.5bn rights issue at a massive discount. UniCredit will sell the stock at €1.943 each and offer two for every one held, the Milan-based lender said in a statement yesterday.

The rights issue highlighted the struggle faced by European lenders under pressure to raise capital to counter a spreading debt crisis.

The issue, the biggest by a European bank for more than a year, is aimed at repairing its balance sheet and meeting stringent capital rules to help restore investor confidence.

The share offer, seen as a litmus test of market appetite for banking stocks in the new year, was priced at a 69pc discount to Tuesday's closing price -- a much higher discount than that used by UniCredit's peers in recent rights issues.

Such terms may discourage other lenders from tapping the market to raise money and prompt them instead to shrink their loan books, sell assets or cut jobs and dividends.

The European Banking Authority has told banks they must find €115bn of extra capital by the end of June to reach a minimum core capital level of 9pc -- with lenders in Italy, Spain and Germany needing the most.

At €8bn, UniCredit's shortfall is the biggest of any bank after Spain's Santander.

UniCredit shares, which have lost more than half their value over the past year as the crisis spread to Italy, closed down more than 14.5pc in Milan.

In another sign of the challenges faced by the bank, UniCredit said commitments from existing shareholders so far would cover up to 24pc of the new share offer -- a lower take-up than had been anticipated.

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