Italy's largest bank raises €550 million through asset sale

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UniCredit has been performing badly in stress tests. Photo: Giuseppe Cacace/AFP

UniCredit said Thursday it had raised over half a billion euros as part of its latest asset sale, part of Italy's largest bank's effort to boost its funds without raising capital from shareholders.

The 552 million euros ($609 million) from the sale of 20 percent of its online banking subsidiary Fineco will be used to boost Unicredit's core capital - the amount of funds available to absorb losses - which has recently fallen perilously close to European banking limits.

Unicredit, Italy's largest bank by assets, said the funds should add 0.12 percentage points to Core Tier 1 ratio, which had fallen to 10.3 percent in June from 10.85 percent in March.

UniCredit was among the worst performing banks in stress tests by the European Banking Authority in late July and has been seeking to strengthen its position in terms of capital.

The bank is widely expected to tap the stock market for funds to make up the capital shortfall eventually, but wants to exhaust other avenues to raise cash first.

Observers expect a capital increase of at least five billion euros ($5.5 billion).

Unicredit's shares closed 3.6 percent lower at 2,066 euros, vastly underperforming the overall Milan stock exchange which posted a decline of 1.2 percent.

Finecobank shares, meanwhile, rose 5.6 percent, making it Milan's biggest gainer of the day.

New chief executive Jean Pierre Mustier, appointed in July, launched an extensive strategic review and has instead chosen to raise funds by selling off assets.

He gave the green light to both the 30 percent sell-off of Fineco shares and a ten percent slice of Polish bank Pekao.

Unicredit is mulling shedding other assets, such as Pioneer Investments, its fund management arm, or the remaining 40.1 percent stake it holds in Pekao. Negotiations for the latter are underway with insurance group PZU, of which 35 percent is owned by the Polish state.

Mustier will present his new industrial plan in London on December 13th.

Thursday's transaction leaves Unicredit with a controlling stake of 35 percent in Fineco.

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