In a land called Italia, where Savers saved, and Borrowers wanted to borrow from the Savers, there were some Banks.
The Banks took the savings from the Savers, and lent some of it to the Borrowers. And as long as the spread on the interest rate paid to the Savers was less than that paid by the Borrowers, all was well and peaceful in Italia. Read more
Leading hedge funds have profited heavily from a rally in European banking stocks in recent weeks and are wagering that their gains will continue amid fresh measures to inject liquidity into the financial system from central banks, says the FT. This year has seen some of the strongest performance numbers from equity-focused hedge fund managers since 2009. The average equity long/short hedge fund returned 3.8 per cent in January and is provisionally up 1.6 per cent for February, according to Hedge Fund Research. Bets in banks such as Italy’s UniCredit, Spain’s Santander and the UK’s Barclays have made some hedge funds millions. Among big hedge fund gainers in the past six weeks have been Toscafund, run by the former Tiger Management star trader Martin Hughes, which has seen its flagship fund gain 7 per cent. A more specialist fund run by Mr Hughes himself is up more than 18 per cent. Crispin Odey’s flagship European hedge fund rose 14.7 per cent in January alone while Lansdowne Partners saw its flagship UK fund rise 5.7 per cent. Fund managers are unequivocal that it has been the European Central Bank’s Long Term Refinancing Operations lie behind their gains.
UniCredit is planning to raise up to €25bn through the issue of covered bonds as Italy’s largest bank by assets seeks to open up a new stream of funding amid ongoing pressures on bank liquidity in the eurozone, says the FT. In documents deposited with the Luxembourg Stock Exchange, UniCredit said the proceeds of the covered bond issuance will be used “for general funding purposes including the funding of the mortgage loans business of the group”. The Italian bank is already in the middle of a €7.5bn rights issue undertaken at the behest of regulators to shore up its capital strength. Shares in the bank have risen 51 per cent in a fortnight on reports that the rights issue would be fully subscribed and thanks to a broader European banking stock rally as concerns over the sector’s capitalisation requirements have receded.
Italy’s banks, led by UniCredit, were the biggest users of the special three-year funding mechanism launched by the European Central Bank in December, according to a new research report, writes the FT. UniCredit – Italy’s biggest bank by assets – took €12.5bn of three-year money under the facility, closely followed by Intesa Sanpaolo, with €12bn, and Monte dei Paschi di Siena, which took €10bn, the report from analysts at Morgan Stanley says. Aside from Italian banks, other significant users of the ECB’s three-year facility included Royal Bank of Scotland, which tapped it for €5bn, via its Dutch subsidiary – equivalent to a quarter of its 2012 funding needs, according to Morgan Stanley, and Spanish banks. FT Alphaville has the full table of Morgan Stanley’s estimates.
Italy’s banks, led by UniCredit, were the biggest users of the special three-year funding mechanism launched by the European Central Bank in December, according to a new research report, writes the FT. UniCredit – Italy’s biggest bank by assets – took €12.5bn of three-year money under the facility, closely followed by Intesa Sanpaolo, with €12bn, and Monte dei Paschi di Siena, which took €10bn, the report from analysts at Morgan Stanley says. The data, submitted to Morgan Stanley but not previously disclosed, underline just how reliant banks in some eurozone nations have become on emergency mechanisms put in place by the European authorities. It will also stoke the gratitude of the Italian financial system towards Mario Draghi, who took over as president of the ECB in November, instituting the funding mechanism soon afterwards. Banks across the eurozone periphery have been frozen out of commercial funding markets for months, as investors have shied away from anything other than the most trusted bond issuers.
A rough ride for UniCredit shares, and rights to buy its shares as part of the bank’s €7.5bn cash call, on Monday — they fell, got suspended limit down, and are dropping again (down 6.4 per cent) at pixel time.
It’s the rights’ first day of trading, so it’s worth asking why it’s so volatile. Read more
So even Royal Dutch Shell has decided that the oil business is hard enough, without running a life assurance scheme for employees on the side. There is now not a single company in the FTSE100 index which offers a final salary pension scheme to new employees. This is the unintended consequence of well-meaning governments piling obligations onto the schemes, while moving them up the batting order of corporate creditors.
Thus, in little more than a generation, a system which allowed most businesses to look after long-serving employees in retirement has been destroyed. There will be wailing and gnashing of teeth, especially since Shell’s decision is a cold commercial one, rather than a necessary part of a survival plan. Yet we shouldn’t get too upset. The old system never worked as well as its advocates now claim. Long-serving employees become addicted to final-salary schemes, unable to leave because no new employer can afford to match their accrued benefits. In a world where companies’ life expectancy can be less than that of their employees, this makes no sense. Read more
Bank of America’s latest risk may be its role as lead underwriter in the UniCredit €7.5bn ($9.58bn) rights issue, the WSJ reports. BofA agreed to support up to 10 per cent of the issue in return for €250m of fees, people familiar with the deal said. Goldman Sachs and Morgan Stanley have both declined to take part in the deal, owing to the risks the Italian bank faces in attracting investors to the sale. “Frankly, you’d be insane to put any money into this,” said one London-based analyst to the FT. “That’s nothing against UniCredit. It’s a country problem.”
Investor worries over the ability of European banks to raise much-needed equity mounted on Thursday after UniCredit suffered a steep share price fall for the second day, rattling the group’s planned €7.5bn rights issue, reports the FT. UniCredit’s share price dropped 17 per cent, compounding a 14 per cent slump on Wednesday, as the bank published details of its deeply discounted share price offering. Analysts blamed continued investor nervousness about Italy and banks in general. The newspaper says one unnamed source close to Unicredit said Consob was poised to investigate allegations that UK hedge funds had been bypassing short-selling ban to drive down Unicredit shares. The WSJ says the two lead outside underwriters, Bank of America Merrill Lynch and Mediobanca, agreed to buy 10 per cent of the offering, or €750m, should it fail completely, citing people familiar with the matter.
UniCredit stock still turning into pink mist after that cash call:
From p.63 of the English version of the UniCredit rights prospectus, which can be found here (H/T Gianluca Codagnone).
* H/T @mark_dow
Here’s the Unicredit rights issue prospectus. We’re busy chasing down the story that this includes a euro break-up as a risk factor, warranted though that is. Read more
Major fallers across the continent (NOT just the banking sector):
This is a reader appeal — just why are there so many banks working on Unicredit’s new rights issue? We still can’t work it out:
In addition, the Company informs that, following today’s Board of Directors meeting, the underwriting agreement related to the transaction was signed. The underwriting syndicate will be coordinated and led by BofA Merrill Lynch, Mediobanca and UniCredit Corporate & Investment Banking who will be acting as Joint Global Coordinators and Joint Bookrunners and will include, in addition to BofA Merrill Lynch and Mediobanca, Banca IMI, BNP PARIBAS, Credit Suisse, Deutsche Bank, HSBC, J.P. Morgan, Société Générale and UBS who will be acting as Joint Bookrunners; ING, Nomura, RBC, RBS and Santander who will be acting as Co-Bookrunners; BBVA, Credit Agricole CIB, Mizuho International plc and MPS Capital Services who will be acting as Co-Lead Managers and BANCA AKROS S.p.A., Banca Aletti & C. S.p.A., Banca Carige S.p.A., Equita SIM S.p.A., Intermonte, Investec Bank plc and Keefe, Bruyette & Woods, Ltd who will be acting as Co-Managers. The underwriting syndicate members have committed, severally and not jointly, to subscribe any new ordinary shares that should remain unsubscribed at the end of the Offering and of the following offer on the MTA of the unexercised subscription rights pursuant to Article 2441, paragraph 3, of the Italian Civil Code, up to a total amount of Euro 7.5 billion. The underwriting agreement contains, inter alia, usual clauses which condition the effectiveness of the underwriting commitments or which grant underwriters the right to terminate the agreement, in line with international best practice…
Italy’s Unicredit said it plans to sell new shares for 43 per cent less than Tuesday’s closing price, excluding the value of rights, in a €7.5 bn-euro offer to strengthen its capital position, Bloomberg reports. UniCredit will sell the shares at 1.943 euros each, offering two for every one held. UniCredit shares were suspended after falling the most in two months in Milan trading. The stock has declined 26 per cent since the lender announced the offering on November 14. The Wall Street Journal says Uncredit has launched the rights offer because it needs to meet tough new European capital requirements and that the terms signal how expensive it could be for other lenders to follow suit in current market conditions. Collectively Italian banks have to raise around €14bn in fresh capital to meet regulatory requirements, according to the WSJ. Unicredit’s steep discount weighed on the shares of other Italian banks Wednesday morning. Banca Monte dei Paschi di Siena shares were down 2.4 per cent, while the shares of Intesa Sanpaolo, which raised €5bn in new equity last year fell by 3.5 per cent.
Asian stocks retreated from a one-week high, while the euro traded at $1.3044, near the weakest level in 11 months on news that European banks took up a record €489bn in the ECB’s liquidity facility, says Bloomberg. The MSCI Asia Pacific Index lost 0.6 per cent at 12:07 pm in Tokyo. Standard & Poor’s 500 Index futures slid 0.2 per cent after the gauge completed its biggest two-day increase in almost three weeks. Australian dollar and South Korean won snapped two days of gains, falling 0.3 per cent and 0.7 per cent respectively. Stocks had initially surged on Wednesday after the stronger-than-expected demand, a record for the amount allocated in a single ECB liquidity operation, was revealed. The high demand came after banks were urged by policymakersto take the funds as part of a concerted effort to ease severe strains across the financial system, the FT reports. Banks used about half the €442bn allocated in one year loans in June 2009 to buy higher-yielding sovereign debt, mostly Greek and Spanish government bonds. Reuters, citing three sources with direct knowledge of the matter, says 14 Italian banks, including UniCredit and Intesa Sanpaolo, tapped €116bn of the facility, or nearly a quarter of the total — including €40.4bn of state-backed bank bonds which were used as collateral for the loans. The biggest amount, €12bn, of state-backed bonds was taken up by Intesa Sanpaolo, which confirmed it had used them as collateral for the loans, and said that these would help it complete pre-funding for its wholesale medium and long term maturities for 2012.
Once upon a time foreign ownership of domestic banking sectors was deemed a “rating strength” in central and eastern Europe.
Before the financial crisis, foreign banks had demonstrated their willingness and ability to support their subsidiaries, according to Fitch associate director Michele Napolitano. But those days are now long gone. Read more
Turn on your spam filters. UniCredit is on fire:
… shows no signs of letting up.
The latest casualty is Altium Securities. Read more
… because Unicredit is passing round the begging bowl.
It’s asking shareholders to back a €7.5bn cash call and trying to make it all look a bit better by pulling the old reverse stock split trick. Read more
Eurozone banks selling assets in Emerging Europe – to tart up their capital ratios under crisis pressure – is not front-page news at the moment.
Frankly, we think it should be! Read more
You can say what you want about the achievements of the WTO; it sure is nice to be part of the club.
Certainly that is what the Kremlin will be thinking this morning after Russia cleared the final hurdle to joining the 153-nation trade organisation after 17 years of trying. Read more
Italian police have seized funds worth €245m at UniCredit, Italy’s largest bank by assets, as part of probe into allegations of tax fraud via a complex financial scheme set up by the Italian bank and Britain’s Barclays, reports the FT. The Italian bank said it was “very surprised by this initiative and remains convinced that both it and its employees acted correctly and properly in relation to this matter”. Alessandro Profumo, UniCredit’s former chief executive who left the bank a year ago, is among those under investigation as the probe relates to financial transactions made in 2007 and 2008 when he was in that office, according to people familiar with the matter. Also under investigation are several other UniCredit employees, and three employees from Barclays as it had set up the financial structure under investigation. Mr Profumo was not immediately reachable for comment. Barclays declined to comment.
UniCredit has given its clearest signal yet that it will seek to raise its capital buffers as market turmoil continues to hit European bank shares, the FT reports. In his first big interview since becoming chief a year ago, Federico Ghizzoni told the Financial Times that details of his “industrial plan” – a blueprint for the bank’s future strategic direction as well as its forecast capital and liquidity needs – were still a work in progress. But he said the bank could increase core capital through “a rights issue, risk weighted asset reduction and asset sales”. He added: “I think the market is ready [to support these] if you propose a credible plan.” A meeting last Friday with the powerful local banking foundations that control 13 per cent of the bank’s shares considered the plan but made no final decision. Mr Ghizzoni said he would hold off announcing his plans to strengthen capital for at least another two months.
Having rallied up earlier on Thursday — European bank share are promptly de-rallying. And on no news so far as we can tell.
Société Générale: Read more
Euro at a four month low against the dollar (chart via Reuters)…