UniCredit must find €8bn to boost balance sheet

UniCredit, Italy’s largest lender and parent of asset manager Pioneer Investments, must find €8bn to shore up its balance sheet, according to figures released yesterday by the European Banking Authority.

Italy’s five leading banking groups, in common with other European banks, saw the value of their bond holdings suffer as a result of the debt crisis. The EBA stress tests included the sovereign bond holdings to the end of the third quarter, which have since dropped in value. The EBA said Italian banks must raise a combined €15.4bn, up 4% from €14.8bn estimated in October. UniCredit’s October estimate was €7.4bn.

It is not expected that these banking groups will have to sell off their asset management divisions to raise capital. UniCredit is planning a share sale in January to raise €7.5bn to reach the core Tier 1 ratio target of 9% set by the EBA. It will include €2.4bn euros of convertible and subordinated hybrid equity-linked securities in its core Tier 1 calculations. UniCredit expects its plan will push its core Tier 1 capital ratio to 9.4%.

Intesa Sanpaolo, Italy’s second largest bank, and parent of asset managers Eurizon and Fideuram, is the only bank that does not have its requirement increased. Banca Monte dei Paschi di Siena must raise €3.3bn, up from €3.1bn. Other banks that need to increase their reserves are UBI Banca (€1.4bn) and Banco Popolare (€2.7bn).

The figures are an update on the region’s banking recapitalization needs set out last October. In a note, Credit Suisse said Germany has seen the greatest increase in capital requirement with a total capital requirement of €13.1bn, compared to €5.2bn back in October (153%). Belgium follows with an increase of 52%, from €4.1bn to €6.3bn, followed by Austria with an increase from €3.0bn to €3.9bn (34%).

France has seen a decrease of €1.5bn to €7.3bn (-17%). BNP Paribas and Societe Generale have seen a reduction of their deficits, in line with company commentary. Sweden has seen the shortfall of €1.4bn eliminated and Portugal has seen a €0.9bn benefit reducing the deficit to €7.0bn. Spain sees no changes. 

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