Bloomberg News

UniCredit Slides for Third Day on Rights Offering Concern

January 08, 2012

(Closes shares from first paragraph.)

Jan. 6 (Bloomberg) -- UniCredit SpA fell in Milan trading, bringing its three-day decline to 37 percent since Italy’s biggest lender priced a 7.5 billion-euro ($9.5 billion) rights offer at a discount.

UniCredit shares tumbled 11 percent to 3.98 euros in Milan trading today. That followed a decline of 17 percent yesterday and 14 percent on Jan. 4. Consob, Italy’s market regulator, said yesterday that it’s investigating the move to see if its ban on short selling in financial stocks has been broken.

The “ongoing sell-off has made the stock the cheapest Italian bank we cover,” analysts at Fidentiis, which has a “sell” recommendation on the stock, wrote in a note today. “Overshooting might continue, leading to even cheaper multiples” because of the execution risk of the rights offer.

UniCredit announced two days ago that it will sell shares for of 1.943 euros each, 43 percent less than the Jan. 3 closing price, excluding the value of rights. That exceeds the 30 percent discount offered by Commerzbank AG in its 5.3 billion- euro rights offer last May and the 39 percent discount when HSBC Holdings Plc raised about $17.7 billion in March 2009.

Capital Concerns

“Unicredit’s woes spark concerns over the necessity and the ability of euro-zone banks to raise equity,” Luca Solca, global head of European equity research at Cheuvreux, wrote in a note today.

UniCredit’s stock decline cut the bank’s market value to 7.7 billion euros, less than a fifth of the company’s tangible book value, a measure of what shareholders can expect to receive if a company liquidates its assets.

The lender expects gross operating income to be “slightly up” in the fourth quarter because of higher revenue from “trading results,” UniCredit said in the rights offer form published Jan. 4. The bank said it’s also targeting lower staff costs and an improvement of the price of risk.

Chief Executive Officer Federico Ghizzoni is cutting costs and reducing staff to strengthen the bank’s finances and boost profitability after posting a third-quarter loss of 10.6 billion euros. Fourth-quarter results will “reflect the volatility of the financial markets, following the sovereign debt crisis, and the persistence of adverse conditions within the macroeconomic context,” the bank said in the document.

--With assistance from Nadine Skoczylas in Rome. Editors: Dylan Griffiths, Keith Campbell.

To contact the reporter on this story: Sonia Sirletti in Milan at Nadine Skoczylas in Roma at

To contact the editor responsible for this story: Frank Connelly at

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