The Trading News for January 2012:
Issues raised as Unicredit sees falls in share prices
Share prices for the Italian bank Unicredit have fallen dramatically today after the bank issued details of an estimated seven and a half billion euro rights dilemma. The banks stock was for a brief period suspended after they had announced that many new shares would be offered to buyers at a largely discounted rate of up to seventy percent compared to the closing price of Tuesday’s market.
The bank had seen its share prices drop by approximately seven percent by the middle of the morning on Tuesday instigating a wide worry among investors. The bank now finds itself facing a eight billion euro shortfall in capital if it is to meet new legislation which has been set by the European Banking Authority. The bank made a statement today that it had in fact secured its interest for just twenty four percent of its shares which were on offer which is so far much worse than they had forecast. Additional World Business News on the FT Website.
This figure for the bank represents a discount in the region of forty three percent to the theory of the ex rights price which is the price a stock should have gained after it had been slightly diluted with the issue of additional shares. For many whichever way you decide to look at it Unicredits current discount is much larger than many other banks of its kind and has come as very shocking news for many investors with some of them choosing to bail out.
The bank currently has the second largest short fall in the region and is only slightly behind the Spanish bank Santander. Unicredit had indeed announced the rights issue back in November where along with five thousand job redundancies which had a reported cost of ten billion euros in the previous three months of the year. This loss is by many seen to be down to the banks own holdings of euro zone debt and now its London based trading operation will be closed as part of cost trimming plans which will cost over one hundred and fifty peoples jobs. Banks across Europe have been advised to increase the amount of capital that they are currently holding in an attempt to deal with the possible financial and economic risks within the region.
Additional Resources:
1. Yahoo Finance: http://uk.finance.yahoo.com/
2. The FSA: http://www.fsa.gov.uk/
3. The Telegraph: http://www.telegraph.co.uk/finance/
4. Google Finance: http://www.google.co.uk/finance
5: Stock Market Trading: http://www.trainingtraders.com/
The feeling around the financial community is that if the bank is indeed struggling to raise the funds it suggests that many other banks could also find difficulties in raising the funds also. The overall view of the situation is that if one of Europe’s larger banks of any significance are not able to raise the funds needed then it is obviously a clear indication that there is a significant lack of investors that are interested in the banking industry.