UniCredit announced on Tuesday a major restructuring plan to raise €13 billion in capital to return the Italian bank to profitability, hoping that a balance-sheet cleanup and cost cuts will persuade investors that Italy’s biggest bank can restore profitability even without much revenue growth. As part of the three-year strategy, the bank plans to shed an additional 6,500 jobs, bringing the total to 14,000, as it aims for 1.7 billion euros of annual cost savings. The bank is targeting 4.7 billion euros of net profit in 2019 with a return on tangible equity above 9%, Milan-based UniCredit laid out in a presentation this morning.
– S&P Downgrades Numerous European Banks, Warns Deutsche Bank May Be Next (ZeroHedge, Feb 3, 2015):
Just hours after apparently settling its suit with the USA (not at all retaliation for downgrading them), S&P has taken the big red marker out on a slew of European banks:
- Downgrades: Credit Suisse, Barclays, Lloyds, Bank of Scotland, RBS, HSBC, and Ulster Bank
- On Watch Negative: Raiffeisen Zentralbank, MBank, Unicredit, Commerzbank, and Deutsche Bank
The driver of the shift in perspective is the apparent removal of the ‘bailout put’, as the prospect of “extraordinary government support” appeared less likely under recently passed bail-in legislation.
– When Stress Tests Fail – Italian Banks Are Collapsing (ZeroHedge, Oct 27, 2014):
Despite the ban on short-sales – which has never worked in the past to do anything but instil fear in traders’ holding long positions – Italian banks are in free-fall following the utter failure of Draghi’s stress tests to encourage confidence in the European banking system.
- INTESA, UBI, UNICREDIT, MONTE PASCHI SUSPENDED IN MILAN, LIMIT DOWN
Given the post-“whatever-it-takes” world of domestic sovereign bond-buying, it is no surprise that Italian govvie risk is jumping higher and the FTSEMIB is plunging.
“A relief rally would not be justified,” said Michael Woischneck, a portfolio manager at Lampe Asset Management in Dusseldorf, Germany. “There are still a lot of problems to fix, and Italian banks still have a lot of work to do. Even for the banks that passed, what is there to be relieved about? They still have to find a business model and figure out how to get unanswered questions that a stress test just cannot answer.”
– CEO Of Italy’s Largest Bank Says Haircuts Of Uninsured Depositors “Acceptable”, Should Become A Template (ZeroHedge, April 4, 2013):
While the head of the ECB and his assorted kitchen sinks scramble to explain how Diesel-BOOM was horribly misunderstood when saying that depositor impairment may and will be the template for future European bank “resolution” (as should have been the case from Day 1), the CEO of Italy’s largest bank appears to have missed the memo. As Bloomberg reports, according to the chief executive Federico Ghizzoni, “uninsured deposits could be used in future bank failures provided global rulemakers agree on a common approach.” Or failing that, because if Cyprus taught us anything is that Europe will never have a common approach on anything, just use deposits as impairable liabilities, period, once the day of reckoning for Non-Performing Loans comes and these are forced to be remarked to reality, just as happened in Cyprus. One can only hope that uninsured deposits do not represent a substantial portion of the bank’s balance sheet because the CEO basically just told them they are next if when risk comes back to the Eurozone with a vengeance. Especially since as Mario Draghi was so helpful in pointing out, “there is no Plan B.”
Cutting large deposits in failing banks, along with other liabilities such as bonds, to offset losses is acceptable as long as small savers’ funds remain protected, Ghizzoni told reporters in Vienna late yesterday. The European Union has to introduce identical rules in all of its member states and ideally those rules would be coordinated globally, he said.
In fact, to the Italian, deposit impairment is perfectly ok as long as “everyone does it” – in other words, if it does become the template the Dutch finance minister already said it is, then all is well.
Including deposits “is acceptable if it becomes a European solution,” said Ghizzoni, 57. “What we cannot accept is differentiation country by country inside the same area. I would strongly suggest to make this decision not only within Europe but within the Basel Committee, where all countries are represented. Otherwise we would open the market for arbitrage.”
– Moody’s Downgrades Six German Bank Groups, And Their Subsidiaries, By Up To Three Notches (ZeroHedge, June 5, 2012):
First Moody’s cut the most prominent Austrian banks, and now it is Germany’s turn, if not that of the most undercapitalized German bank yet: “The ongoing rating review for Deutsche Bank AG and its subsidiaries will be concluded together with the reviews for other global firms with large capital markets operations.“
The full downgrade Matrix:
Moody’s takes multiple actions on German banks’ ratings; most outlooks now stable
Frankfurt am Main, June 06, 2012 — Moody’s Investors Service has today taken various rating actions on seven German banks and their subsidiaries, as well as one German subsidiary of a foreign group. As a result, the long-term debt and deposit ratings for six groups and one German subsidiary of a foreign group have declined by one notch, while the ratings for one group were confirmed. Moody’s also downgraded the long-term debt and deposit ratings for several subsidiaries of these groups, by up to three notches. At the same time, the short-term ratings for three groups as well as one German subsidiary of a foreign group have been downgraded by one notch, triggered by the long-term rating downgrades.
– Gaddafi family assets worth more than €1bn seized in Italy (Guardian, Mar 28, 2012):
Late dictator, his son and intelligence chief owned property, shares in football clubs, and a Harley-Davidson motorbike
Assets worth more than €1bn belonging to the late Muammar Gaddafi, his son, and his intelligence chief were seized in Italy in raids by its revenue guard made at the request of the international criminal court in The Hague.
They included holdings in some of Italy’s biggest corporations, a 1.5% stake in the Serie A side Juventus and a Harley-Davidson motorbike.
Also seized from the Libyan leader was a 150-hectare estate on the Mediterranean island of Pantelleria, a destination for illegal migrants and refugees attempting to enter Europe by boat from Libya. The seizures were ordered by the Rome appeals court at the request of the international criminal court in The Hague. The ICC launched a hunt for property belonging to Gaddafi and his associates last June when it issued warrants for their arrest on charges of crimes against humanity.
Financial assets owned by the late Libyan leader had earlier been frozen in the European Union and elsewhere following two UN resolutions in February and March, 2011. Gaddafi was killed by insurgents last October after failing to put down a popular uprising backed by most western powers.
The most valuable single item seized was a 1.26% interest in Italy’s biggest bank, Unicredit, worth more than €600m (£502m). Other significant shareholdings included stakes in the oil and gas giant, ENI, the defence firm Finmeccanica and two companies in the Fiat motor group.
– Unicredit Lost 30% Of Its Market Cap In Two Days (ZeroHedge, Jan. 5, 2012):
When we presented the news about yesterday’s UniCredit rights offering we said that “a UniCredit €7.5 billion new stock issue pricing at a whopping 43% discount to market price shows that fair value of actual demand for European banks is about half of where the artificially propped up price is.” Sure enough the market appears to have taken testing this assumption to task, and in the past two days 30% of the entire market cap of UniCredit has been destroyed. And what makes this otherwise sad development for many people, who had previously been fooled by various governments in believing that asset values are fair and could thus rise when in reality everything has been distorted and manipulated beyond comprehension, simply hilarious is that not even a month ago UniCredit did a one for ten reverse stock split. At this rate another reverse stock split is imminent before next week is over. Which is to be expected: after all prices are determined on the margin and are a function of systemic liquidity, which in Europe no longer exists in free form. US readers be advised: discoveries such as this one are coming to the US very soon.
– I’ll Hold Yours If You Hold Mine: The Italian Ponzi Comes Home (ZeroHedge, Jan. 5, 2012):
So, according to this, Mediobanca is the largest shareholder of UniCredit. I guess it could be custodial, but does explain why they are part of the underwriting group that backstopped the deal.
If you combine the Central Bank of Libya, Libyan Investment Authority, and Libyan Foreign Bank holdings, then they are actually bigger than Mediobanca.
At the risk of making a mountain out of a mole hill, Unicredit is the largest holder of Mediobanca (8.7% according to Bloomberg)
Remember when CDO’s all bought each other’s BBB and BB tranches, because no one else would?
- EURUSD Dips Below 1.28 As All Hell Breaks Loose In Italian Financials (ZeroHedge, Jan. 5, 2012):
Much to the chagrin of the US Department of Mass Disinformation, the market has completely ignored the ridiculous ADP data, and has focused squarely on what is happening in Milan where the serial halting of bank trading has resumed. Following the 4th unhalt of UniCredit, its stock is now down 15% on the day as it scrambles to catch up to the fair value represented yesterday courtesy of the rights offering to be about 43% below the market price. As a result while the robotic decoupling in the US continues, as somehow America is supposed to be able to import and export from and to itself and completely ignore that it has about $3 trillion in European bank exposure, the EURUSD has just dipped to below 1.28 for the first time in over a year. Lastly, not helping things is the already noted implosion of refiner Petroplus which just announced that access to all of its credit lines has been suspended, sending the stock down 20%. Looks like it will be a long, cold winter for Europe even as the US decouples to a Dow 36,000 mushroom cloud.
UniCredit – 4 halts and counting:
And EURUSD below 1.28:
– Revealed – the capitalist network that runs the world (New Scientist, Oct. 19, 2011):
AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters’ worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.
The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.
The idea that a few bankers control a large chunk of the global economy might not seem like news to New York’s Occupy Wall Street movement and protesters elsewhere (see photo). But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world’s transnational corporations (TNCs).
“Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder. “Our analysis is reality-based.”
A day after Credit Suisse killed the Chinese bank sector saying that the equity of virtually the entire space may be worthless if NPLs double, as they expect they will to about 10%, the Swiss bank proceeds to kill European banks next. Based on the latest farce out of Europe in the form of the third stress test, which is supposed to restore some confidence, it appears that what it will do is simply accelerate the flight out of everything bank related, but certainly out of anything RBS, Deutsche Bank, BNP, SocGen and Barclays related. To wit: “In our estimation of what could be the “new EBA stress test” there would be 66 failures, with RBS, Deutsche Bank, and BNP needing the most capital – at €19bn, €14bn and €14bn respectively. Among the banks with the highest capital shortfalls, SocGen and Barclays would need roughly €13bn with Unicredit and Commerzbank respectively at €12bn and €11bn. In the figure below we present the stated results. We note RBS appears to be the most vulnerable although the company has said that the methodology, especially the calculation of trading income, is especially harsh for them, negatively impacting the results by c.80bps.” Oops. Perhaps it is not too late for the EBA to back out of this latest process and say they were only kidding. And it gets even worse: “We present in this section an overview of the analysis which we published in our report ‘The lost decade’ – 15-Sep 2011. One of our conclusions was that the overall European banking sector is facing a €400bn capital shortfall which compares to a current market cap of €541bn.” Said otherwise, we can now see why the FT reported yesterday that banks will be forced to go ahead and proceed with asset firesales: the mere thought of European banks raising new cash amounting to 75% of the entire industry’s market cap, is beyond ridiculous. So good luck with those sales: just remember – he who sells first, sells best.
And the scary charts:
1. Capital Shortfalls under Stress Test part Trois (9% min. CET1 ratio)
– The War Against The Rating Agencies Begins: Italy Prosecutor Seizes Moody’s, S&P Documents (ZeroHedge, Aug 4, 2011)
And so the war against the rating agencies is now official as a floundering Europe does anything in its power to scapegoat anyone and everyone, starting with its natural sworn enemy of course, the rating agencies.
According to Reuters,
“Italian prosecutors have seized documents at the offices of credit rating agencies Moody’s and Standard & Poor’s in a probe over Suspected “anomalous” Fluctuations in Italian share prices, a prosecutor said on Thursday.“
Ah yes, it is Moody’s fault that Unicredit, Intesa, Fiat and pretty much all other Italian companies now close limit down at least once a day. Either way, this is sure to end well. We will bring you more as we see it.
– The Vespa Has Crashed Into The Mountain: Italy Burning (ZeroHedge, Aug 1, 2011):
Italy undergoing a slow motion crash, with bank after bank getting halted, first Intesa, then Monte Paschi, and most recently, main bank Unicredit.
The FTSEMIB is now down a whopping 5.5% from intraday highs, led by the financial sector which may or may not last the week absent another EFSF expansion as we have speculated before.
Of course, should that happen, Italy becomes a liability and not a funder, meaning the proportional obligations of Germany and France will surge, just as we explained two weeks ago.
And more bad news: the spread between the 10 year Italy – Bund just hit an all time wide of 349, +16 bps on the session, as Italy CDS are now trading 328, +12, and Spain is 9 bps wider to 374.
Time for bailout #3, this time to rescue Italy, then Belgium and Spain, then France and the UK, until finally the Fourth Reich, in the darkness, shall bind them.
And just the country’s top (and we use that term loosely) banks:
– BLAIR’S FOND FAREWELL TO GADDAFI (Mirror):
TONY Blair bids a fond farewell to former foe Colonel Gaddafi yesterday. He flew in on the Libyan leader’s private jet for the meeting in the middle of the Sahara desert.
The pair, now firm friends after Mr Blair helped Libya return to the
international fold, shook hands warmly and smiled.
He added: “It is now a very productive relationship for us. It’s an example of a situation where 10 years ago it would have been impossible for me to speak to Col Gaddafi, to a situation where the relationship is a close one. I find him very easy to get on with.“
(New York Times) LONDON — Global oil companies said Monday that they were making plans to evacuate employees in Libya after some operations there were disrupted by political unrest. Libya holds the largest crude oil reserves in Africa, and the moves drove some stock prices down and a crucial oil benchmark to a three-year high.
The largest and most established foreign energy producer in Libya, Eni of Italy, said in a statement that it had begun repatriating “nonessential personnel” and the families of its employees.
The Norwegian energy company Statoil, which operates in Libya in partnership with Repsol of Spain and Total of France, said that it would close its office in Tripoli and that a handful of foreign workers were leaving. “The safety of our personnel is our main priority,” said a spokesman, Bard Glad Pedersen.
OMV of Austria, which produces about 34,000 barrels of oil a day in Libya, said it planned to evacuate 11 workers and their families, leaving only essential staff.
The Organization of the Petroleum Exporting Countries ranks Libya No.7 among its members, with 4.4 percent of OPEC’s proven crude oil reserves. Libya exports most of its oil to Europe, with Italy its biggest customer, according to the United States Energy Information Administration.
Shares in Eni and OMV dropped Monday, while the price of Brent crude, an important benchmark for oil traded in London, jumped $3.22 a barrel, or 3.2 percent, to settle at $105.74, before spiking above $108 in after-hours dealing. It was the highest level since 2008.
“We’re concerned, and of course we’d like to see a solution sooner rather than later,” said Jason Kenney, an analyst with ING Financial Markets. “It’s very difficult to see how this is going to go. The oil price will be volatile.”
The British oil company BP, which has only exploration operations in Libya, said it was planning to evacuate some of its 40 foreign workers, mostly from Tripoli, where the unrest spread Sunday. It also said it had suspended preparations for a drilling project because employees of a contractor had been evacuated.