Bloomberg News

Italy’s Banks Need More Collateral Amid Downgrade, Deutsche Says

January 16, 2012

Jan. 16 (Bloomberg) -- Italian banks need additional collateral to obtain funding after the country’s credit rating was cut by Standard & Poor’s and the London Clearing House raised its margin calls on Italian bonds, Deutsche Bank AG said.

“These points are negative for the Italian banks, for the pressure on their sovereign holdings and on interbanking funding,” Paola Sabbione, a Milan-based analyst at Deutsche Bank, said in a note to investors. “A larger collateral is now required to obtain the same ECB funding.”

Italy’s credit rating was cut two levels by S&P to BBB+ from an A rating on Jan. 13, adding to pressure on the country’s banks, which are rushing to raise cash amid speculation that Italy will be the next victim of the debt crisis.

“The mark-to-market of Italian banks’ domestic sovereign bonds could deteriorate,” said Sabbione, adding that “the impacts on the sector’s trading income should be manageable for the first quarter.”

UniCredit SpA, Italy’s biggest bank, fell as much as 6.1 percent, and was down 2.2 percent to 2.86 euros at 9:30 a.m., giving the company a market value of 16.5 billion euros ($20.9 billion). Intesa Sanpaolo SpA, the country’s No. 2 lender, declined 0.3 percent to 1.23 euros.

--Editors: Stephen Taylor, Francis Harris

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Francesca Cinelli in Milan at fcinelli@bloomberg.net

To contact the editor responsible for this story: Francesca Cinelli at fcinelli@bloomberg.net


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