Monday, January 9, 2012

UniCredit confirms that investors not interested in bank stocks without ultra transparency

As predicted, investors have essentially no interest in Eurozone banks stocks unless the banks provide ultra transparency.

Without the on-going disclosure of each bank's current asset, liability and off-balance sheet exposure details, investors do not have the information they need to assess the risk of a bank stock investment.

According to a NY Times Dealbook article,

Shares of the struggling Italian bank UniCredit continued to slide on Monday after an offering of new stock met with little interest from investors. 
In midafternoon trading in Milan, the bank’s share price had fallen more than 12 percent. Trading in the bank’s stock was suspended at least twice on Monday because of market volatility. 
Last week, the bank announced a plan to sell new stock at 1.943 euros a share in an effort to raise nearly 7.5 billion euros ($9.6 billion). At that level, the company said, the price represented a 43 percent discount, making certain assumptions about the offering. 
Since the announcement, investors have been wary, and the bank has lost more than 40 percent of its market value. UniCredit’s current market capitalization of about 7.6 billion euros ($9.65 billion) is only slightly more than the amount the bank had hoped to raise through its rights issue. 
Investors have shown little interest in the company’s rights issue, which also began trading on Monday. The issuance, which allows shareholders to buy two new shares each in the Italian bank for 1.943 euros, was trading at 68 euro cents a share in midafternoon trading in Europe. 
The lack of investor appetite for UniCredit’s rights issue is a bad omen for other European banks, which must raise a combined 115 billion euros in capital by a regulatory deadline of June. 
Many firms had hoped to tap the equity markets to raise new funds. With investors shying away from multibillion dollar rights issues, banks may need to find other ways to increase their reserves. Options include selling business operations, particularly in overseas markets, and rejiggering their balance sheets to free up capital.

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