The rescue of two failing Italian lenders helped to lift European benchmarks higher Monday, with solid gains for lenders in Southern Europe in particular.
Good assets from both Banca Popolare di Vicenza and Veneto Banca were sold to Intesa Sanpaolo (ISNPY for a nominal sum while the Italian government agreed to provide the rescuer with a €4.8bn ($5.3 billion) cash injection to help mitigate any potential impact on Intesa's capital buffer.
Some voices have criticized the deal as it leaves the bad assets in the hands of the Italian tax payer and exposes the public purse to the prospect of a much larger hit further down the line.
However, the crucial earlier concern over the financial impact on retail bondholders has been mitigated with guarantees, which could also provide a template for future rescues.
Milan's FTSE MIB led Europe's benchmarks higher, with a gain of close to 1% in noon trading, topping the 21,000 level. Also in Southern Europe, Madrid's IBEX gained more than 0.5% during the session, which is notable given that the last bank rescue took place in the country.
London's FTSE 100 added 0.30% to close at 7,446 while, in Paris, the CAC 40 gained 0.56% to clse at 5,295. Frankfurt's DAX index rose 0.29% before settling at 12,770.
In individual stocks the biggest mover in the banking sector was Intesa Sanpaolo, unsurprisingly, after it was effectively paid by the Italian government to take on the good assets of two regional banks. Shares were up more than 4%. CaixaBank (CIXPF and Sabadell (BNDSY were both big risers in Spain.
Elsewhere across the Continent, Nestle (NSRGY was a big mover with a gain of more than 4% in early trading after a U.S. hedge fund led by investor Dan Loeb declared a $3.5 billion stake in the Swiss confectionery maker and began pushing for a change of strategy.
Hikma (HKMPY was among the big gainers in the pharmaceuticals sector after the company unveiled a leadership change and reorganization of its U.S. business. The shakeup of the business comes in response to several years of rapid growth for Hikma, and is expected to position the drugmaker for further expansion in years to come. It also follows the high-profile failure of a key drug approval in May.