Markets will breathe a sigh of relief as beleaguered Italian bank UniCredit completes its 7.5 billion euro ($9.7 billion) rights issue on Friday, but few expect it to prompt a flurry of share sale activity from other lenders. Some 31 European banks have been told to fill a 115 billion euro collective hole in their balance sheets by the end of June as part of moves to tackle the continent's sovereign debt crisis.
But most are finding ways to boost their capital buffers without issuing new shares. "The fact UniCredit gets done is obviously a positive ... but I'm not sure it necessarily swings the needle in terms of other banks thinking of coming to market," said one equity capital markets (ECM) banker. "It is still a last resort." UniCredit's offering, keenly watched as a litmus test of investor appetite to support European banks, got off to a rocky start, with its shares dropping as much as 47 percent in the four days after the 2-for-1 issue was announced.
Retail demand was stronger than expected, a source close to the deal said, with good interest coming from US investors. The sale also received a boost from a plan by Abu Dhabi's investment vehicle Aabar to raise its stake in the bank to 6.5 percent. The bank's stock is now at around 3.82 euros, well above the 1.943 euro offer price and sources close to the deal expect take-up, due to be announced by Monday, to be above 95 percent.
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