Moves by Italy's biggest banks - Intesa Sanpaolo SpA and UniCredit SpA - to raise capital from investors and shun the restrictions of state aid helped boost their share prices on Wednesday. UniCredit, the Italian bank most battered by the financial crisis, said on Tuesday after markets closed that it would carry out a 4 billion euro ($5.8 billion) cash call to boost its capital ratios, which are at the low end among big European banks.
Intesa Sanpaolo said it would issue a 1.5 billion euro Tier 1 bond to strengthen its capital base by 40 basis points. Turning its back both on state aid and a share sale, Intesa Sanpaolo said it would carry out disposals, partnerships and listings for non-core assets worth 11-15 billion euros.
"In our view, for UniCredit and Intesa the recourse to capital markets, organic capital generation and actions on core assets seem a better solution than requesting government funding," Citigroup said in a research note. UniCredit, the biggest lender in central and eastern Europe, was up 1.6 percent at 2.7625 euros at 1005 GMT, paring gains after hitting a 12-month high. Intesa Sanpaolo, Italy's biggest retail lender, was up 1.5 percent at 3.07 euros.
The DJ Stoxx banks index was 0.8 percent firmer. Credit Suisse raised its price target on Intesa Sanpaolo to 3.50 euros from 3.40 euros and kept its 'outperform' rating. "Staying put, we believe, was the best option for shareholders, whose shares have not been diluted either permanently (through a capital increase) or temporarily (government money)," it said.
Natixis raised its rating on UniCredit to 'add' from 'reduce'. UniCredit also said on Wednesday it had disposed of a real estate portfolio worth about 574 million euros to a closed fund managed by Ream SgR, a Turin real estate asset manager. It will get 110 million euros in capital gains from sale of a majority stake of the fund, it said.
Both Intesa Sanpaolo and UniCredit had signed up for state aid under a 12 billion euro crisis-fighting plan. However, improving markets and an easing of the crisis made state aid, with its restrictions on lending and dividends, less attractive. Economy minister Giulio Tremonti repeatedly criticised banks for shunning help, which was also aimed at securing lending for businesses.
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