Shares in Italy's biggest bank went so crazy trading had to be halted
Investors reacted strongly to the bank selling a €328 million stake in online lender FinecoBank.
UniCredit, which is Italy's only globally systemically important lender, announced the sale of the stake in Fineco as part of a series of measures from new chief executive Jean Pierre Mustier designed to bolster the bank's capital position.
The sale has cheered investors,who have bought into shares so heavily that they were briefly halted, after a circuit breaker was triggered on UniCredit's Milan-traded stock. Trading has now restarted.
UniCredit's performance has also been boosted by renewed hopes of a rescue package for Italy's stricken banking sector, which has been the subject of a great deal of worry in the markets in recent weeks. A report from the IMF suggested that a rescue package should be agreed on Tuesday.
"There is adequate flexibility within the existing state aid and BRRD (Bank Recovery and Resolution Directive) framework to be able to deal with the problems," said Rishi Goyal of the IMF said. "The framework exists, the framework is able to handle that. The question is how best do the authorities and the EU institutions discuss what they are doing with regard to seeking the best solutions for this," he added.
Here's how UniCredit looks so far on the day:
Mustier took over leadership of the bank in June, having previously been in charge of its investment banking arm, and has moved quickly to try and shore up UniCredit's capital position to help it weather the current storm in both the Italian financial sector, and the country's wider economy.
The €328 million stake equates to roughly 60.7 million shares in FinecoBank, leaving Unicredit with a controlling majority shareholding of 55.4%.
In a statement released on Tuesday morning, UniCredit said:
This transaction should be seen as part of the commitment of the Group to reinforce and optimize its capital position and a renewed impetus of pro-active portfolio management in which all assets, with no exception, will be subject to the same disciplined capital management and any incremental value creating opportunities will be seized.
As Italy's biggest lender, UniCredit's success on the day has helped drag many other banks in the country higher, with all of the highest gainers on Italy's benchmark FTSE MIB index coming from the banking sector. Here's the scoreboard:
The rally comes despite the IMF warning that Italy faces two decades of lost growth. "On current projections, the economy is not expected to return to its pre-crisis (2007) output peak until the mid-2020s, implying nearly two lost decades, a growing income gap with euro zone partners, and a protracted period of balance sheet vulnerability."