Italian lenders plunged in Milan, leading declines in the European Stoxx 600 Banks Index, after market regulator Consob decided not to extend the ban on short selling of financial shares.
UniCredit SpA (UCG), Italy’s biggest bank, declined as much as 3.8 percent, and was down 12 cents to 3.77 euros by 10:25 a.m., giving the bank a market value of 21.9 billion euros ($29.4 billion). Intesa Sanpaolo SpA (ISP), the second-largest lender, fell as much as 4.2 percent, and was down 5 cents to 1.44 euros. The FTSE Italia All-Share Banks Index dropped 3.3 percent.
Italy joined France, Belgium and Spain in ending their short-selling bans last week. The regulators prohibited short selling of financial shares in August in an effort to stabilize markets after European banks including Societe Generale SA hit their lowest levels since the credit crisis of 2008.
“The end of the short-selling ban on Italian banks is hurting stocks,” said Stefano Girola who manages about 3 billion euros at Albertini Syz & Co. in Milan. “In most cases valuations are full as Italian banks trade at 11 times 2012 earnings, including the benefit of the ECB auctions,” he said.
Unione di Banche Italiane Scpa (UBI), the worst performing bank in the FTSEMIB index, dropped 6.5 percent to 3.35 euros, while Banca Monte dei Paschi di Siena fell 5.4 percent to 37 cents.
UniCredit’s Chief Executive Officer Federico Ghizzoni and Intesa’s CEO Enrico Tommaso Cucchiani said earlier this month their banks expect to participate at the next ECB long-term refinancing operation, without disclosing further details. Mediobanca said last week it will ask about 4 billion euros to refinance its expiring bonds.
The LTRO tenders on Feb. 29 “will mark the end of liquidity-driven support for the Italian banking sector,” Paola Sabbione, an analyst at Deutsche Bank AG wrote in a note today. “In a post-LTRO world, we envisage that the market will again focus on core earnings and profitability; the Italian banks seem vulnerable to this trend,” she said.
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