Unicredit's international lenders commit to €13bn rights issue, as bank also ditches €17.7bn of non-core loans

Oliver Gill and Hayley Kirton
Unicredit wants to start paying dividends by 2019 (Source: Getty)

​Italy's largest ever rights issue was announced this morning by Unicredit, the country's biggest bank.

The lender pushed the button on a €13bn (£10.9bn) rights issue, in a balance sheet restructuring Unicredit hopes will pave the way for dividend payouts to recommence by 2019.

A raft of international banks, including Bank of America Merrill Lynch, J.P. Morgan, and Mediobanca – as "Joint Global Coordinators" – and ​Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs International and HSBC – as "Co-Global Coordinators", have underwritten the deal.

The underwriting agreement means the banks will be on the hook up to pick up the newly issued shares if there is insufficient demand from the market. The shares are to be issued by June next year.

Read more: It's a deal: Unicredit shares jump on Pioneer confirmation

The final details of the rights issue will be submitted for approval at a extraordinary shareholders' meeting, scheduled to take place next month.

Meanwhile, Unicredit also announced plans to flog €17.7bn of non-core loans to US financial giants Fortress Investment Group and Pimco.

The loans will be transferred into a wholly separate entity and majority owned by the US firms, with Unicredit retaining a minority stake.

Today's news comes just a day after the Italian bank announced it had sold its asset management business, Pioneer, to French fund manager Amundi for €3.5bn, and less than a week after it ditched its interest in Polish Bank Pekao.

Read more: Now UniCredit has shed its interest in this Polish bank

Unicredit's turnaround plan, which was revealed at the lender's capital markets day today, is the latest in relatively new chief executive Jean Pierre Mustier's attempts to revamp the bank.

"We have developed a pragmatic plan based on conservative assumptions, with tangible and achievable targets, dependent on cost and risk management, levers which are firmly under our own control," he said.

Shares in Unicredit are up 8.3 per cent at €2.63 at time of writing.

However, noting this was the fourth capital raising programme the bank had been involved in since the financial crisis, Michael Hewson, chief market analyst at CMC Markets UK, remarked:

The biggest future problem facing the bank isn’t so much the restructuring programme but the future growth prospects of the Italian economy, which are pretty poor. Getting investors to dilute themselves further is one thing, but to do so in order to set aside future bad loan provisions is another, particularly when the long term Italian economic outlook remains so uncertain.

The bank's balance sheet resizing comes as Italy's third largest lender Monte dei Paschi di Siena teeters on the brink of failure with a new government being installed and elections expected next year.

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