Eurozone's 6th largest bank showing signs of strain......dominos lining up?

useless_git_requires_wife

Unicredit shares fall on rights issue concerns




Shares in Italian bank Unicredit fell sharply after it announced the details of a 7.5bn euro ($9.8bn; £6.3bn) rights issue.
The stock was briefly suspended after the bank announced that the new shares would be offered at a 69% discount to Tuesday's closing price.
Shares were down 7.1% by mid-morning on Tuesday.
The bank faces a 7.97bn euro capital shortfall in order to meet new rules set by the European Banking Authority.
In a statement, the bank said it had secured interest for just 24% of shares on offer so far, worse than expected.
The price, represents a discount of 43% to the theoretical ex-rights price, the price a stock should have after it has been diluted by the issue of new shares.
"Whatever way you slice and dice it, UniCredit's discount is much bigger than for the other banks and that being the case, I think it's come as a bit of a shock to some investors, and I think some of them are just bailing out," said Andrew Lim, banks analyst at Espirito Santo.
Fund raising Unicredit has the second largest funds shortfall in Europe after Spanish bank Santander.
It announced the rights issue in November along with 5,000 job cuts after reporting a 10.6bn-euro loss in the three months to September due to writedowns on its holdings of eurozone debt.
Its London trading operation will close as part of the cost-cutting plans, with the loss of 150 jobs.
European banks have been told to increase the amount of capital they hold to deal with possible economic and financial risks.
If the bank struggles to raise the money it could suggest other banks may also find it difficult.
"A bank of this significance, of a large European country, not being able to obtain money easily is clearly an indication of a lack of investors interested in the banking industry," said Ralph Silva from SRN analysis.

http://www.bbc.co.uk/news/business-16406972

useless_git_requires_wife

Nicely foreseen by Elite Trading forum member 'shopster' in this analysis from the 21st of December:


12-21-11 02:46 PM

Here's the gist......

Most of Europe's major banks are insolvent. But only in the last week have they lost most of their access to additional funding. Their key source of funding has been U.S. money-market funds. But these funds are bailing out of Europe as quickly as they can. The result is a run on Europe's banks.

This crisis is now past the point where the authorities can hope to control the situation. We are now days (not weeks or months) away from the first major bank failures.

Italy's UniCredit, one of Europe's largest banks, would be the first catastrophic bank failure there.

Here's the problem with UniCredit.
It holds more than 1.2 trillion euro in assets. But it only has 74 billion euros in equity.
That includes nearly 24 billion euros in things like goodwill and tax losses – intangible equity that can't be traded or sold… things that are only really equity in the minds of accountants.

When you do the math, you discover that UniCredit is leveraged 24 to 1.

That's risky enough. But when you understand what it owns – piles of European sovereign debt that's all going to have to be marked down substantially – you can see the fundamental problem.

At 24 to 1, an average loss severity of only 4.1% wipes out the bank.

I'd estimate a fair evaluation of UniCredit's books will show an average loss severity of at least 10%, which implies actual losses of more than 100 billion euros.

These are Fannie Mae- and Freddie Mac-sized losses. And Italy, which is already the world's third-largest sovereign borrower, doesn't have the money to bail out the bank.

Now, here's the really bad news...

Out of all the major European banks, UniCredit has the highest amount of bonds coming due next year (2012) – 51 billion euros.

Currently, its bonds are trading on the market at prices equivalent to four notches below investment-grade and eight notches below its official Moody's A2 rating.
This is a very serious problem.

The bank cannot operate without an investment grade credit rating. Nor can it possibly refinance the 51 billion euros.

Compounding matters, the bank took a 14.3 billion euro loss in the most recent quarter that Bloomberg called "surprising."

UniCredit has clearly reached the point where private investors will no longer provide financing.

Its bonds are now trading at prices that indicate an eight-notch reduction in credit rating – prices at which the bank cannot hope to operate profitably. To raise desperately needed capital, it has organized a huge equity offering. The problem is, if investors won't buy the bank's bonds, why would they buy its equity, especially when so much of it is probably completely inflated in value?

The problems at UniCredit have already spilled over into the entire European interbank funding market.

An unnamed bank executive in Europe told Reuters this week that "the market for unsecured funding with maturities that go beyond two years is literally dead." Given that Europe's banks can't presently fund themselves without government support… you should view the exit of the U.S. money-market funds as a run on Europe's banks. This crisis is very much underway.

Even with these facts in the market, most people – U.S. investors in particular – don't seem to understand this coming crisis will be much, much worse than the Lehman Brothers failure.

We're not talking about the failure of a single bank – though it seems more and more likely that a single bank (UniCredit) will be first – we're talking about the failure of an entire system, the largest system of credit and banking on Earth.

The_White_Horse

it's all going to end in disaster and it is all the fault of the lefty spendthrift

useless_git_requires_wife

Euro drops to 16-month low over bank concerns

Weaker demand for benchmark French 10-year bonds weighed on bank shares



The euro has dropped to its lowest rate against the dollar in 16 months as concerns continue over the health of Europe's banks.
The euro fell to $1.2831 against the dollar and was at an 11-year low versus the yen.
Markets were unsettled after France's cost of borrowing rose and a Spanish minister suggested its banks may face a higher bad loan bill.
Bank stocks dropped, with shares in Italy's UniCredit at a 19-year low.
Luis de Guindos, Spain's economy minister, told the Financial Times that its banks may face up to 50bn euros ($64.2bn, £41.3bn) in new bad loans - higher than previous public estimates by the government.
Later on Thursday, Spain will unveil more austerity measures.
French bank stocks fell, with Societe Generale down 4.8% and BNP Paribas down 4.1%.
Germany's Commerzbank and Deutsche Bank both fell more than 4%.
Spain's Santander dropped 3.3%. UniCredit fell 10% and its shares were suspended for the second day in a row.
Italy and Spain - both passing painful spending cuts - will have to sell debt in the coming months.
French debt sale France sold 8bn euros of bonds at an auction, paying an interest rate of 3.29% to borrow for 10 years, up from 3.18% at the last sale in December.
Many investors fear that France is poised to lose its top credit rating, making it more expensive to borrow.
In December, France saw its AAA credit rating placed on negative outlook by rating agency Fitch.
Fitch said the change in outlook was prompted by the heightened risk of government liabilities arising from the eurozone's debt crisis.
At Thursday's sale, demand from investors for the benchmark 10-year bonds had fallen.
The bid-to-cover ratio was 1.64, almost half of the 3.05 it was in the December auction.
France introduced an 65bn-euro austerity plan in November.
The gap, or spread, on French bonds compared to comparable debt from Germany - Europe's largest economy - hit record highs last year.


http://www.bbc.co.uk/news/business-16424802

nearlynew

The dominoes are lining up.

The plate-spinning theft and deception of banks and their puppet governments cannot go on.

The parasite is killing its host.

Road_Hog

It shows the state of our mainstream media today, when they seem focussed on the new Big Brother series. Yet we learn far more about the important things going on, on a general chat message board in the few posts in this thread.

funkyfreddy9k

there was a post on the telegraphs live debt crisis blog today about Monti... maybe related???? not seen any explanation yet.


13.58 Italian Prime Minister Mario Monti has left Rome for a trip to Brussels... although no one is sure why.

related or not all signs are pointing to !!!! imminently hitting the fan.

pararct

The lack of news coming out of the Euro Parliament since the back to work day after the New Year has been very sparse indeed.....

Could this be due to the fact that they have not in fact yet returned to work and are enjoying additional holiday?

Yet another example of why they 'just don't get it' just like Italy and Greece and Spain........

Masomnia

So a bank's rights issue has failed to raise enough cash, trading in its shares has been suspended, and the chap in charge has gone off on a sudden visit to the people with the money. It's starting to sound familiar :eek:

A._Badger

funkyfreddy9k wrote: »

there was a post on the telegraphs live debt crisis blog today about Monti... maybe related???? not seen any explanation yet.


13.58 Italian Prime Minister Mario Monti has left Rome for a trip to Brussels... although no one is sure why.

related or not all signs are pointing to !!!! imminently hitting the fan.

He's probably been called back for more instructions about how to run the country of which he is the EU-imposed fake Prime Minister.