UniCredit (UNCFF) shares fell Thursday in Milan, amid mixed trading for European banks, after steeply discounting the price of shares it will sell to investors as part of its capital raising.
Italy's biggest lender will offer new shares at a 38% discount to their theoretical post-rights issue price, equating to an offer price of €8.08, raising €13.1 billion ($14 billion) as it seeks to plug holes in its balance sheet and capital buffer.
UniCredit stock was down 0.3% by 1000 GMT, changing hands at €26.06. It has fallen by 4.4% over course of the last month, making it the second worst performing Italian lender after Intesa Sanpaolo (ISNPY) .
The bank announced a mammoth plan to strengthen its balance sheet in December, as Monte dei Paschi (BMDPY) teetered on the edge of an abyss, in order to address a festering pile of nonperforming loans that has been encroaching on its regulatory capital buffers.
It is selling a majority stake in €17.7 billion portfolio of bad debts to Pimco and Fortress, but will also cut staff and take further charges against the value of its loan book.
The measures have pushed its common equity tier 1 (CET1) ratio below the minimum level set by the ECB and it now faces a race against time to get the rights issue done in order otherwise bank regulations will mean that it is prohibited from making the coupon payment on its AT1 co-co bonds scheduled for the end of March.
An available distributable items restriction (ADI) will also mean that UniCredit cannot pay dividends to ordinary shareholders.
The lender said on Wednesday that it will begin touting its capital increase on Feb 23 and will aim for completion by March 10 at the latest.
UniCredit has already been instructed by the ECB to submit a 'capital plan' setting out how it intends to address the shortfall in its buffer.
However, if its capital increase fails for any reason, then it could be subjected to a broader intervention by the ECB and Italian regulators - possibly culminating in a bail-out.
UniCredit has begun work to securitize is NPL portfolio, which it expects to complete in the second half of the year, and aims to have the sale to Fortis and Pimco concluded before the end of 2019.