(Adds Consob ruling on accounting method for Bank of Italy
MILAN, March 10 UniCredit, Italy's
largest bank by assets, is set to unveil plans to raise 2
billion euros ($2.8 billion) on the bond market to boost its
capital and offset an expected sharp increase in writedowns on
bad loans in the last quarter of 2013.
The lender will announce a U.S. dollar-denominated
Additional Tier 1 bond on Tuesday when it releases its full-year
results and new business plan, two bankers working on the deal
told Reuters IFR service.
The bond, the first of its kind to be issued by an Italian
bank, is a new form of hybrid bond that banks are issuing to
strengthen their capital bases.
UniCredit, which also has large banking operations in
Germany, Austria and central Europe, declined to comment.
Like other domestic lenders, UniCredit is trying to keep a
lid on defaulting bank loans, which soared to 160 billion euros
for the whole of Italy at the end of January as the country
struggles to emerge from its longest recession in 70 years.
Analysts expect UniCredit to have set aside at least 4
billion euros to cover rising bad debts in the fourth quarter
alone in an effort to clean up its balance sheet ahead of a
Europe-wide health check of banks.
That would compare with 4.4 billion euros in the first nine
months of 2013, bringing the total for the year to more than 8
UniCredit may be able to offset some of the provisions for
bad loans by booking a 1.4 billion euro pre-tax capital gain on
the revaluation of its stake in the Bank of Italy.
However, the European Securities and Markets Authority
(ESMA) has raised objections over whether Italian lenders should
be allowed to book gains in their 2013 results stemming from the
revaluation, according to several Italian banking sources.
Asked about its stance, ESMA declined to comment.
On Monday Italian stock market regulator Consob said the
accounting of the stakes was a complex matter not explicitly
regulated by international accounting rules, adding lenders
could choose the method they deemed most fit.
An analyst consensus forecast posted by UniCredit on its
website in October estimated full-year net profit of 931 million
euros. In a break with the past UniCredit did not post an
updated consensus ahead of the results nor a quarterly profit
That profit risks being wiped out and even turned into a
loss if the bank goes ahead in booking heavy loan loss charges
and the revaluation of the Bank of Italy stake is not included
in the net profit figure.
But even including the boost from the central bank's
revaluaiton, several analysts raised the possibility of a 2013
scrip dividend - paid in shares rather than cash - from the bank
as it seeks to bolster its balance sheet.
A report by Mediobanca Securities on Monday said a large
number of its clients had asked it about the likelihood of a
capital increase at the bank, adding however that concerns about
the bank's financial strength were misplaced.
Mediobanca forecasts a 9.8 percent core capital ratio
according to Basel III requirements for UniCredit, well above
the 8 percent minimum set by the European Central Bank as a
benchmark for this year's asset quality review.
The bank could also announce plans to list 25-30 percent of
its online banking unit Fineco, two sources close to the
situation said on Friday.
Analysts say its business plan to 2018 will likely target
double-digit return on equity in four years' time, but they
caution it may be too early to say whether this is feasible.
($1 = 0.7205 euros)
(Reporting by Silvia Aloisi; additional reporting by Huw Jones
and Helene Durand; Editing by Lisa Jucca and David Evans)