By Marco Bertacche, Elisa Martinuzzi and Francesca Cinelli
Italy’s markets watchdog said it will investigate trading in bank shares after the country’s biggest lenders posted their largest decline in two years.
Part of the slump was due to automatic stop-loss trades, an official for the regulator said by telephone today. The watchdog hasn’t ruled out market manipulation. UniCredit SpA (UCG), Italy’s biggest bank, and Intesa Sanpaolo SpA (ISP), the second-largest, led lenders lower, falling 5.5 percent and 4.3 percent respectively. Both stocks were briefly suspended after breaching limits on intraday swings.
Bank stocks tumbled amid concern the European debt crisis may spread just as lenders face scrutiny from regulators over capital levels. Italian 10-year bonds also fell, increasing the additional yield investors demand to hold the securities over benchmark German bunds to the most since the euro was introduced in 1999.
European leaders meeting in Brussels today attempted to staunch the crisis, vowing to stave off a Greek default as long as Prime Minister George Papandreou pushes through a package of budget cuts next week.
“Contagion fears keep re-emerging as long as credible, lasting solutions in Greece are pending,” said Christian Weber, a Munich-based strategist at UniCredit.
Officials at Intesa Sanpaolo and UniCredit in Milan declined to comment. Intesa closed down 7.6 euro cents at 1.707 euros and UniCredit fell 8 cents to 1.363 euros, its lowest price since April 2009.
Silvio Berlusconi
Moody’s Investors Service said yesterday it may downgrade 13 Italian banks because they are vulnerable to a cut in the government’s credit rating. The firm had said last week it may cut the sovereign rating because the turmoil in Europe could drive the country’s borrowing costs higher.
“The downgrade by Moody’s may be furthered to encompass the long-term debt,” said Thomas Laschetti, a trader at Tullett Prebon Ltd. in London. “That is enough to create the right environment for deleveraging exposure to the sector.”
Prime Minister Silvio Berlusconi said today the country’s banks are “well capitalized.” Speaking at a summit of European leaders in Brussels, Berlusconi said he wasn’t worried about Moody’s comments about the country’s banks.
Intesa and UniCredit are among the five Italian banks that are also being stress-tested by European regulators next month to assess whether they have sufficient capital.
The European Banking Authority yesterday updated its stress tests to take into account extra trading losses that banks may face on their holdings of sovereign debt from crisis-hit European Union countries including Greece.
Remaining Uncertainty
Italian banks are also seeking to raise money from investors to bolster capital. Unione di Banche Italiane ScpA (UBI), Italy’s fourth-biggest bank, fell 0.9 percent to 3.784 euros. The lender may struggle to lure buyers to its 1 billion-euro ($1.4 billion) rights offering, which closes today. The bank is selling eight new shares at 3.808 euros for every 21 held.
“There is still uncertainty surrounding the sovereign risk and bank capital requirements,” said Paul Vrouwes, who helps oversee about 20 billion euros of shares at ING Investment Management in The Hague. “Italy’s economy is struggling more than other nations.” He doesn’t plan to buy UBI stock.
Banca Monte dei Paschi di Siena SpA (BMPS), which is seeking to raise 2.2 billion euros in a rights offering that runs through July 8, fell as much as 5 percent to 51.95 euro-cents, a record low. The shares are available for 44.6 euro-cents in the offering.
European Central Bank President Jean-Claude Trichet said this week that the link between the region’s debt crisis and its lenders is “the most serious threat” to financial stability in the European Union.
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