UniCredit (UNCFF)  shares were active in European trading Monday amid speculation of a tie-up with France's second-biggest bank and a capital raising effort to boost the Italian lender's flagging balance sheet.

UniCredit stock was up by more than 3% in early European trading, recording an intra-day high of €2.41, before paring gains. It is down by more 50% for the 2016 year-to-date.

Reuters reported over the weekend that UniCredit, Italy's biggest bank, is planning a capital-raising rights issue that could see it tap investors for €13 billion ($14 billion) in new equity.

A second report, published Monday by Italy's ANSA news agency that suggested UniCredit could be contemplating a tie-up with France's Societe Generale (SCGLY) , was quickly dismissed as "market speculation" by a bank spokesperson.

UniCredit is set to hold an investor day on Dec. 13 where it will unveil the results of a strategic review that was recently completed by CEO Jean-Pierre Mustier. It is widely expected that Mustier will use the event to announce further disposals as well as a plan of action for the bank's €76 billion pile of bad loans.

Analysts have been singling out UniCredit as likely to carry out a rights issue for much of the summer, given its poor performance in European Banking Authority (EBA) stress tests in July and a festering nonperforming loan problem in Italy.

"We identify 3 scenarios and conclude a big-bang approach requiring an €11bn capital raise is the optimal way to recapitalize the bank," said Jefferies analyst Benjie Creelan-Sandford in a September research note.  

Equivalent to almost 20% of gross domestic product, the rising tide of Italian nonperforming loans pushed a number of regional Italian lenders into the arms of administrators in late 2015, leaving investors wary of the Italian banking sector in 2016.

It hasn't helped that Monte dei Paschi (BMDPY) , the world's oldest lender, has spent the months since July seeking to put the final touches to its third rights rescue in just as many years.

UniCredit emerged from July EBA stress tests with a CET1 capital ratio of 7.1%, well below the 9.1% average for all European banks.

So far UniCredit has attempted to repair its balance sheet without tapping investors for new money, instead concentrating on asset sales.

It raised more than €1.5 billion from asset sales during the third quarter, including a part of its holding in Poland's second largest bank Bank Pekao, a stake in online broker FinecoBank and a credit card payments business.

It still holds stakes in Bank Pekao and FinecoBank, which could be worth a collective €4 billion, and it has placed its asset management division Pioneer Global Asset Management on the block - which has been widely tipped as being worth in the region of €3 billion to €4 billion.

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