Italy’s Banco Popolare in rights issue

City A.M. Reporter
Banco Popolare has joined European banks tapping investors to help meet new global rules with plans for a hefty capital hike, triggering fears bigger Italian peer Banca Monte dei Paschi di Siena will join them.

Shares in Verona-based Banco Popolare, Italy’s seventh largest bank by market value, plunged 5.6 per cent yesterday to €4.06 after it said the previous day it would launch a rights issue of up to €2bn (£1.7bn), a roughly 70 per cent increase over its market value. The bank, one of Italy’s weakest lenders due to its Core Tier 1 ratio of 6.1 per cent, is the first Italian bank to seek capital after the release of the Basel III global capital guidelines last month.

Popolare’s capital raising comes hot on the heels of a proposed £3.3bn capital increase by Standard Chartered and Deutsche Bank raising €10.2bn earlier this month.

The Basel III rules, completed in September, require lenders to hold more high-quality capital against risks. They will also tighten the definition of what qualifies as top-tier capital.

Popolare’s move comes as the quarterly earnings season is under way, with Switzerland’s UBS releasing its results today.

Credit Suisse’s net profit undershot forecasts last week as sluggish equities trading cut into investment banking profits while Dutch online equities trader BinckBank missed third-quarter profit and sales estimates yesterday.

Italian banks, which have yet to report their quarterly earnings, were relatively unscathed by the financial crisis triggered by the 2008 collapse of US bank Lehman Brothers.

However, the crisis has prompted them to raise capital ratios that had been at the low end among big European lenders.