UniCredit (UNCFF) shares rebounded in Milan Tuesday even as Italy's largest lender added €1 billion ($1.1 billion) to its expected full-year writedown and attempted to assure investors it will close its €13 billion cash call by its March deadline.
The additional charge for the fourth quarter stems from investments in state-backed rescue vehicle Atlante and, among other things, contributions to the country's National Resolution Fund. The figure adds to the €12.2 billion bad loan writedown the bank revealed Tuesday. UniCredit expects to record a loss of €11.8 billion for 2016 when it reports full-year numbers on Feb 9.
However, shares in the bank rose around 0.88% to €26.40 each by 10:30 a.m. GMT, clawing back some of Monday's 6% decline, in a gain that was largely in line with the Stoxx Europe 600 BanksIndex, as investors lifted financial stocks around the region in the wake of stronger-than-expected inflation data.
Italy's largest lender has been locked in a race against time to plug a gap that will open up in its capital buffer when it books the more than €13 billion exceptional charge.
If the bank fails to plug the gap before the end of March, then it will be prevented from making the coupon payment on one of its AT1 contingent convertible bonds and will not be able to make dividend payments to stockholders.
It could also face intervention from the European Central Bank should the supervisors in Frankfurt decide that its capital plans are insufficient.
UniCredit also warned investors that if its rights issue fails for any reason, it could face the same fate as fellow Italian lender Monte dei Paschi (BMDPY) , which is in the process of being nationalized.
Such an outcome would mean steep losses for equity and bondholders while, as Italy's only globally systemically important financial institution, or GSIFI, it could also be expected to send shock waves reverberating across global markets.