Back in purgatory

5 December 2016 By Neil Unmack Follow @unmack1

The failed referendum need not cause a crisis if UniCredit completes its rights issue and fellow lender MPS can be quickly stabilised. Political turmoil and weak growth, though, could push up bad loan levels. A new “bad bank” would help, but political will may be lacking.

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Context News

Italian Prime Minister Matteo Renzi said he would resign after Italians voted against his constitutional reforms in a Dec. 4 referendum.

Investment banks were set to decide on Dec.5 whether to proceed with a recapitalisation for Banca Monte dei Paschi di Siena, which seeks to raise 5 billion euros through a debt swap and new equity.

UniCredit, another Italian lender, is seeking to raise up to 13 billion euros through a share sale, as well as further funds through asset sales.

The FTSE Italia All-share Bank Index lost 2.26 percent as of 1045 GMT.

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