UniCredit and Intesa hit by Greece and capital jitters

MILAN | Fri Jun 24, 2011 4:06pm BST

(Reuters) - Shares in Italian banks UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI) fell sharply on Friday on

worries about their capital positions and the deepening euro zone crisis.

Brokers cited a host of reasons behind the sell-off.

Factors included speculation that imminent stress test results may highlight capital shortfalls at Italian lenders, a European central banker saying the euro zone debt crisis was not over, German comments on a possible sovereign debt rollover, and a Moody's downgrade threat on Italian banks.

One Milan analyst, who asked not to be named, said macroeconomic factors were the main driver, as well as the threat of a credit rating downgrade by Moody's.

Shares in Italy's top two banks were briefly suspended for hitting the daily downward limit.

By 3:17 p.m., Intesa SP was down 4.7 percent at 1.699 euros, while UniCredit was down 5.3 percent at 1.366 euros.

Banking shares had recovered earlier in the day but deepened losses again in a volatile session amid high volume.

Banking sources familiar with the stress test process expressed confidence on the outcome of the health check for the five Italian banks under scrutiny -- UniCredit, Intesa, UBI Banca (UBI.MI), Banca Monte dei Paschi (BMPS.MI) and Banco Popolare (BAPO.MI).

"There is the utmost tranquillity in the banking sector," over the stress tests one of the sources said, adding the situation has not changed after the European Banking Authority requested a second round of data from banks.

Italian banks are adding to their capital, with UBI Banca's (UBI.MI) 1 billion euros rights issue closing on Friday, and Banca Monte dei Paschi di Siena (BMPS.MI) ongoing 2.15 billion euros issue running to July 8.

Intesa Sanpaolo recently completed a 5 billion euro capital increase while Banco Popolare raised 2 billion euro in fresh capital this year.

POSITIVE

A source close to UBI's rights issue told Reuters on Friday the offer was covered for more than 75 percent.

"The expectation is it will conclude positively by the end of the day," the source said.

A second source close to the bank said the capital increase would be "well more" than 90 percent covered.

There have been worries that an underwriting consortium led by Italian investment bank Mediobanca (MDBI.MI) would have to take on UBI shares, because UBI's share price in the market would slip below the rights issue price.

UBI's price slipped under the 3.808 euros rights issue price on Friday for the first time during the offer period, but by 3 p.m. it had recovered to 3.82 euros.

UniCredit is one of the few banks not to have carried out a capital increase, though domestic media has speculated it could announce one, with a business plan, later this year.

"UniCredit has a 9 percent Core Tier 1 ratio. (The stress test) is not a problem for UniCredit," a Milan-based analyst said, referring to end-March data.

The STOXX Europe 600 banks index .SX7P was down 1.5 percent. Italian banks were hit harder than elsewhere, although France's Natixis (CNAT.PA) also lost 3.9 percent.

(Additional reporting by Andrea Mandala, Valentina Za, Gianluca Semeraro, Michel Rose in Italy, Steve Slater and Dominic Lau in London; Writing by Nigel Tutt; Editing by Will Waterman and David Hulmes)