Shares in Italian banks Banca Monte Paschi di Siena and UniCredit had mixed fortunes as both took steps to raise fresh funds.
Monte Paschi is making a last-ditch effort to raise funds as the prospect of a state rescue looms.
After regulators rebuffed its request for an extension, the world’s oldest bank said it will press ahead with a plan to raise €5bn from investors in the next 19 days.
As the odds of attracting fresh investment lengthened, the chance of a government bailout that will impose losses on bondholders grew.
Meanwhile, Amundi is to buy rival Pioneer Investments from UniCredit for €3.6bn, a deal that will bring in much-needed capital.
UniCredit, Italy’s largest bank, is preparing to publish a new business plan and announce a fundraising via a share issue that sources said could reach €13bn.
If successful, the fundraising would be a boost for Italy’s banking sector, which is weighed down by bad loans and political uncertainty following the resignation of prime minister Matteo Renzi.
Monte Paschi shares rose 3.5% yesterday, but are 84% down this year. UniCredit shares fell 3% and are 53% down this year.
On Monte Paschi, “the recap of Banca MPS on the market remains extremely difficult to realise in the current context and in such short period of time”, said Banca Akros analyst Luigi Tramontana.
“The alternative would be the nationalisation of the bank and burden-sharing by hybrid and subordinated bondholders.”
Monte Paschi suffered a blow last week on Mr Renzi’s resignation. The resignation clouded Italy’s political outlook just as the troubled Italian bank was seeking to lure investors to its clean-up plan, prompting the lender to make the unsuccessful bid to the ECB for a three-week extension, sources said.
The bank now plans to give bondholders another chance to exchange its debt for equity, after initially persuading investors holding about €1bn of bonds to convert.
A stock sale would follow the debt swap, though banks have not yet committed to underwriting the transaction, Monte Paschi said.
Should the share offering proceed, about €28bn of bad loans would be removed from the bank’s balance sheet, bundled into securities and sold to investors.
Observers were not optimistic on the prospects for success. Manuela Meroni, an analyst at Banca IMI, said that a so-called precautionary capital increase with help from the state and burden-sharing by debt holders was the most likely outcome.
Monte Paschi is planning to ask retail investors to swap about €2bn of subordinated bonds for equity.
Bloomberg, Reuters, and Irish Examiner staff
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