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.