UniCredit SpA (UNCFF) shares fell sharply Monday after Italy's biggest bank said it would take a bigger-than-expected hit to its fourth-quarter earnings linked to bad loans on its balance sheet.
UniCredit shares, which hit a seven-week high late last week, were marked around 4.3% lower at €26.52 each in early trading in Milan after the bank told investors in its planned €13 billion ($13.9 billion) capital raising program that it would take a €12.2 billion writedown on its loan book and cautioned that its capital ratios will not meet targets set earlier this year by the European Central Bank.
The bank sees its common equity tier 1 (CET1) ratio at around 8% at the end of 2016, according to the Monday statement, that's around 200 basis points lower than required by the ECB as part of the regulator's stress tests last August.
Reports last week had suggested the bank would reveal pricing arrangements for the cash call as early as Wednesday, with an official launch slated for Feb. 6.
Earlier this month, UniCredit shareholders, in a near-unanimous vote, backed the rights issue plans even as the bank warned it faces a race against the clock if holders of certain additional Tier 1 (AT1) securities are to get their coupon payments at the end of the first quarter.
UniCredit said at the time that bad loan provisions and restructuring charges it expects to book for the fourth quarter, that were announced in December, will hit its common equity Tier 1 capital ratio. It also said its CET1 ratio may fall below the threshold required by the ECB and, without remedial action, will prevent the lender from making an AT1 coupon payment that is due around the end of March.