By Valentina Za and Stephen Jewkes
MILAN May 21 The biggest shareholder in Banca Carige sold an 11 percent stake in the Italian bank, less than it had planned, at a deep discount on Wednesday, sending shares in the mid-sized lender down by as much as 18 percent.
The banking foundation that owned more than 40 percent of Carige has no money to invest in the 800 million euro ($1.10 billion) cash call the Genoa-based bank plans to launch next month to beef up its weak capital base.
The not-for-profit entity had forced a delay of the rights issue in a bid to find friendly investors to sell part of its holding to.
On Tuesday the foundation said it was aiming to sell 15 percent of the bank on the market. But on Wednesday, the foundation said it had sold 10.96 percent at 0.40 euros a share, a 20 percent discount to the stock's Tuesday closing price of 0.502 euros.
The stake sale hit volatile markets with investors fretting about disappointing growth data ahead of European Parliamentary elections. The Italian economy unexpectedly contracted in the first quarter, data showed last week.
"The timing was wrong and the quality of the asset on sale wasn't superb," a senior trader in Milan said asking not to be named.
Several traders said the foundation had initially set a price range of between 0.435 euros and 0.48 euros, so that the discount would have been at the most 13.3 percent.
The foundation said it netted 95.3 million euros from the sale. Selling a 15 percent stake at the top of the initial price range would have yielded more than 150 million euros.
A similar move by the foundation shareholder of Monte dei Paschi allowed it to cut its stake in the lender to 2.5 percent, from around a third, and strike a shareholder pact with two other investors in Italy's third-biggest bank.
Carige's common equity Tier 1 capital stood at 6.5 percent of its risk-weighted assets at the end of March, below an 8 percent threshold set by the European Central Bank (ECB) in its review of the banking sector this year.
Carige says the rights issue will boost the ratio to 9.5 percent but analysts still see it as one of the weakest among the 15 Italian banks under scrutiny by the ECB.
By 0941 GMT, shares in Carige were down 16 percent at 0.42 euro against an Italian banking stock index up 1 percent.
Regulators have allowed the foundation to cut its stake in the bank to 19 percent. ($1 = 0.7302 Euros) (Additional reporting by Massimo Gaia; Editing by Erica Billingham)