(Rewrites first paragraph, adds comments from analysts,
interview with BPER CEO)
By Valentina Za and Andrea Mandala
MILAN Jan 27 Shares in Italian banks fell on
Monday after Banco Popolare warned of a higher than
expected yearly loss and announced a surprise cash call,
fuelling speculation other stretched lenders may tap the market
to boost their capital.
Italian banks have seen bad loans soar during a two-year
recession. And in a regulatory push ahead of a European Central
Bank (ECB) review of balance sheets across the sector, the Bank
of Italy has been encouraging lenders to set aside more money to
Banco Popolare shares led the day's losses with a 13 percent
fall by 1500 GMT in response to plans for a 1.5 billion euro
($2.1 billion) rights issue of new stock. Italy's fourth-biggest
bank also said late on Friday large loan-loss provisions had led
to a 2013 net loss of 600 million euros, which it said was
higher than analysts had estimated.
"Banco Popolare's capital hike raises additional questions
over Italian banks' asset quality," analysts at Goldman Sachs
wrote in a note to clients.
Shares in mid-tier banks such as Banca Popolare Emilia
Romagna (BPER) and Credito Valtellinese,
dropped around 8 percent amid concerns they too might have to
raise more capital.
Both belong to a group of 15 Italian lenders under scrutiny
by the ECB in a sector "health check" of their balance sheets
Besides Banco Popolare, three of these lenders - Monte dei
Paschi di Siena, Banca Popolare di Milano
and Banca Carige - plan to tap markets before the
summer to plug a combined capital shortfall estimated at around
6 billion euros.
Monte dei Paschi, Italy's No. 3 Bank, plans the biggest
issue, totaling some 3 billion euros. Genoa-based Carige must
plug a capital shortfall of at least 800 million euros, while
Pop Milano needs 500 million to repay state aid.
Unlisted Veneto Banca, meanwhile, says a planned conversion
of debt into equity, along with asset sales, should boost its
core capital ratio above the 8 percent target set by the ECB,
allowing it to avoid a rights issue.
In an interview with Reuters, BPER Chief Executive Luigi
Odorici said the bank's core capital was in line with ECB
requirements and it had no plans for a rights issue.
Credito Valtellinese declined comment.
Royal Bank of Scotland analysts said they expected the ECB's
review to unveil further recapitalisation needs at as many as 10
mid-tier Italian banks struggling with low profitability and bad
Banco Popolare said it had substantially increased loan-loss
provisions in the fourth quarter, adopting stricter criteria for
classifying loans as non-performing in line with guidance from
the Bank of Italy.
"We doubt ... that reclassification of problematic loans to
be a Banco Popolare-specific situation and we would expect other
Italian banks to be under pressure, given (the) risk of higher
loan-loss provisions in the fourth quarter," analysts at
brokerage Keefe, Bruyette and Woods said in a note.
Banks with weak capital such as Monte Paschi and BPER would
be under the spotlight, they added.
BPER's Odorici said loan-loss provisions in the last quarter
were in line with the average of the previous three.
The Bank of Italy has reviewed BPER's loans over the course
of two inspections in 2012 and 2013. It focused on performing
loans and the value of guarantees during a second audit ended in
September with a "partially favourable" outcome, he said.
"Following that audit we've scrupulously followed the Bank
of Italy's guidelines on provisioning and loan classification,"
In a further sign of problems afflicting Italian banks,
shares in Banca Popolare di Milano (BPM) lost 4 percent after a
source close to the matter said its biggest shareholder,
businessman Andrea Bonomi, had sold his entire stake.
Bonomi had wanted to change the ownership structure of the
lender to make it more attractive to potential investors, but
his plan was shelved at the end of last year because of
opposition from trade unions.
The stake sale casts further doubts over the cooperative
bank's reform efforts, even as the Bank of Italy pushes Italian
cooperative lenders to reform and give shareholders powers that
better reflect the size of their stake.
($1 = 0.7307 euros)
(Aditional reporting by Silvia Aloisi and Elisa Anzolin Editing
by Jane Merriman and David Holmes)