UniCredit Finds Bullish Favor Ahead of Italy Referendum, but Monte dei Paschi still Lags

Less than two weeks ahead of a pivotal referendum on constitutional reform in Italy, brokers are becoming bullish on the nation's largest lender, UniCredit (UNCFF) , touting a better-than-expected repair of its capital buffers as a key reason behind why there could be as much as 50% upside to the stock.

But life in the Italian banking sector remains a tale of two cities, with analysts remaining downbeat on the beleaguered Monte dei Paschi (BMDPF) as the world's oldest bank seeks to tie up its latest rescue, which will likely see it raise more than five times its market capitalization in new equity.

Matters are further complicated for all Italian institutions by the looming referendum on constitutional reform, which could see the government fall apart at the seams should Prime Minister Matteo Renzi fail to secure enough support for his reforms.

Such an outcome would certainly lead the market to question the long term future of the Italian economy, while it could also give rise to the possibility that the government falls and is replaced by one less sympathetic to the European Union in a general election. 

UniCredit has previously flagged the referendum as a key risk to its plans, according to press reports, saying that some key decisions would be deferred until its investor day on December 13 - which takes place after the Italian plebiscite on December 4. 

Analysts at Jefferies raised their price target for UniCredit stock Monday to €3.0 per share, betting on a favorable outcome for the bank either way, and hgihlighting the potential for as much as 50% upside from current levels.

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