Little by little, UniCredit, Italy’s biggest lender by total assets is working on plans to shore up its balance sheet and strengthen its position both in Italy and in the Eurozone.
As reported by Unicredit itself in a statement, the new CEO Jean Pierre Mustier has indicated December 13 as the date on which the bank will announce a much anticipated recapitalization plan with the aim of increasing its low capital ratios. The reason behind the choice of this date is strictly connected to the crucial Italian constitutional referendum that will take place nine days before the announcement. Indeed, senior bankers believe that most of foreign investors, due to the political uncertainty in the run up to the vote, are somewhat reluctant to invest in Italy prior to the long awaited referendum.
According to analysts, Unicredit is currently short of €5 billion to €10 billion in capital. The final amount that will be raised by the bank will strictly depend on how radical the CEO Mustier wants to be with the cleanup of the bank’s almost €80 billion bad loans pile and what target core Tier one ratio he wants to achieve. Rumors suggest that he is planning a capital increase of about €10 billion even after asset sales, in order to have a safe cushion against any potential increase in capital requirements from EU regulators.
Since his appointment in July, the new CEO Mustier moved rapidly into the job and immediately began to reinforce Unicredit capital with concrete actions. The bank, indeed, struggling with capital shortfalls and high levels of doubtful loans, sold on July 12th 2016 minority stakes (10 per cent) in both the polish subsidiary Bank Pekao (€749 millions) and the domestic online broker FinecoBank (€328 millions). Being consistent with this strategy, on October 13th Unicredit also raised, through an accelerated book building, about €550 millions by selling another 20 per cent stake in FinecoBank.
The most important decisions, however, will be revealed only in the December plan. Nevertheless, talks are already underway that Unicredit is currently showing a strong interest in selling its international fund management arm, Pioneer Investments (€200 billion of assets under management) in a potential deal that could net €3 billion ($3.4 billion). Additionally, there are also other rumors that the bank is planning another €3 billion sale of its remaining holding in the above mentioned subsidiaries (40 per cent of Bank Pekao and 35 per cent of FinecoBank).
Therefore steps are already being taken to shore up the bank’s core Tier one ratio, which fell to around 10.3 per cent in June, lagging European peers. The objective should be achievable even for a bank that has experienced a 60 per cent drop in the market value of its shares in the last year and that consequently is currently trading at barely one quarter of its book value.
As reported by Unicredit itself in a statement, the new CEO Jean Pierre Mustier has indicated December 13 as the date on which the bank will announce a much anticipated recapitalization plan with the aim of increasing its low capital ratios. The reason behind the choice of this date is strictly connected to the crucial Italian constitutional referendum that will take place nine days before the announcement. Indeed, senior bankers believe that most of foreign investors, due to the political uncertainty in the run up to the vote, are somewhat reluctant to invest in Italy prior to the long awaited referendum.
According to analysts, Unicredit is currently short of €5 billion to €10 billion in capital. The final amount that will be raised by the bank will strictly depend on how radical the CEO Mustier wants to be with the cleanup of the bank’s almost €80 billion bad loans pile and what target core Tier one ratio he wants to achieve. Rumors suggest that he is planning a capital increase of about €10 billion even after asset sales, in order to have a safe cushion against any potential increase in capital requirements from EU regulators.
Since his appointment in July, the new CEO Mustier moved rapidly into the job and immediately began to reinforce Unicredit capital with concrete actions. The bank, indeed, struggling with capital shortfalls and high levels of doubtful loans, sold on July 12th 2016 minority stakes (10 per cent) in both the polish subsidiary Bank Pekao (€749 millions) and the domestic online broker FinecoBank (€328 millions). Being consistent with this strategy, on October 13th Unicredit also raised, through an accelerated book building, about €550 millions by selling another 20 per cent stake in FinecoBank.
The most important decisions, however, will be revealed only in the December plan. Nevertheless, talks are already underway that Unicredit is currently showing a strong interest in selling its international fund management arm, Pioneer Investments (€200 billion of assets under management) in a potential deal that could net €3 billion ($3.4 billion). Additionally, there are also other rumors that the bank is planning another €3 billion sale of its remaining holding in the above mentioned subsidiaries (40 per cent of Bank Pekao and 35 per cent of FinecoBank).
Therefore steps are already being taken to shore up the bank’s core Tier one ratio, which fell to around 10.3 per cent in June, lagging European peers. The objective should be achievable even for a bank that has experienced a 60 per cent drop in the market value of its shares in the last year and that consequently is currently trading at barely one quarter of its book value.
Source: Yahoo Finance
Nonetheless, doubts about Italy and Italian banking crisis in particular still persist. Unicredit seems to be heading the right way, but there is still a serious dose of uncertainty about the final outcome and the real success of this announced recapitalization.
Matteo Franchello