UniCredit increases cash call to clean up balance sheet
After Banca Monte dei Paschi di Siena failed to raise funds on the market, attention now turns to a much bigger cash call by UniCredit.
Italy's largest bank was yesterday seeking investor backing for a €13bn rights offer - almost as much as its market value - to carry out a turnaround plan under chief executive officer Jean Pierre Mustier.
Shareholders meeting in Rome also will be asked to approve the conversion of every 10 shares into one new share after the stock dropped more than 45pc last year.
While Monte Paschi's failed share sale and ensuing government bailout last month have revived doubts about Italian banks and their ability to deal with bad debt, Mustier's strategy presented in mid-December has won praise from analysts.
Like its smaller rival, UniCredit plans to use most of the cash to absorb losses on loans that the bank is selling at a discount.
Unlike Monte Paschi - which tried to raise about €5bn - UniCredit is a profitable lender that's seeking funding for a cleanup, not for survival.
"UniCredit's new business plan tackles the right concerns and represents a break-through switch in order to rescue and revamp the equity story of the group," said Fabrizio Bernardi, an analyst with Fidentiis Equities. "This is what investors were asking."
Mustier, a 55-year-old Frenchman who took over in July, said he has met with more than 200 investors in recent weeks and plans to start the offer before March 10. Many European and US institutional investors have shown interest in the capital increase, he said in a interview on Thursday with Italian newspaper La Stampa.