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Italian lenders fell in Milan for a third day on investor concern that Italy is at the frontline of Europe’s financial woes after the Spanish banks’ bailout.
UniCredit SpA (UCG), Italy’s biggest bank, declined as much as 2.8 percent, and was down 3 cents to 2.45 euros at 11 a.m., giving the bank a market value of 14.2 billion euros ($17.8 billion). Intesa Sanpaolo SpA (ISP), the second-largest lender, fell as much as 3.3 percent, and was down 1.7 cents to 1.02 euros. The FTSE Italia All-Share Banks Index dropped 1.5 percent.
“We would recommend investors to remain cautious on Italian banks even in a short-term rally,” Kian Abouhossein, a London-based analyst at JPMorgan Chase & Co. wrote in a note today. “Implied common equity for Euro banks will remain at elevated levels, due to sovereign issues, regulatory concerns and the inability to fund in public markets.”
Italian banks’ holdings of the country’s sovereign debt have increased by one-third to 295 billion euros at the end of April from November, making the lenders more dependent on the financial strength of the government. Italian 10-year securities dropped for a fifth day after Austrian Finance Minister Maria Fekter said yesterday Italy may require European Union assistance because of the high interest payments on its debt.
Italy’s 10-year yield increased 13 basis points to 6.16 percent, the highest since Jan. 31.
Banca Popolare dell’Emilia Romagna Scrl, the worst performer in the benchmark FTSE MIB index, dropped 3 percent to 3.48 euros, while Banca Monte dei Paschi di Siena, Italy’s No. 3 bank, fell 2.93 percent to 19.8 cents.
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