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Italian bank stocks get a lift from €20bn bailout request

Italy’s bruised bank stocks are getting a welcome kick higher this morning after the country’s government asked the Italian parliament to authorise up to €20bn to help prop up its most troubled lenders last night.

The request comes after long-standing concerns about the health of the Italian banking system, which lumbers under the highest bad loan pile in the eurozone.

Rome’s finance minister Pier Carlo Padoan said any state funds would help ensure banks have access to liquidity and help bolster their capital levels.

The plans have helped shares in Monte dei Paschi, which could be subject to a state bailout as early as next month, rise over 3 per cent, after a 9 per cent drop on Monday. Italy’s wider banking index is bouncing 1.5 per cent at publication time.

Elsewhere in Italy:

  • Banco Milano +2.6 per cent
  • Banco Popolare +2.5 per cent
  • UniCredit +1.6 per cent
  • UBI Banca +1.5 per cent

Despite yesterday’s request for parliamentary approval for possible state aid, the government is still hoping to avoid pumping any taxpayer money into the banking system.

Much of this however will depend on the fate of a €5bn private sector recapitalisation plan for Monte dei Paschi – Italy’s third largest bank – which is due to be completed by the end of the year.

A failure to find a private sector solution for MPS would see the state intervene and also require funding from the bank’s junior bondholders, many of whom are ordinary Italian retail investors.

Yesterday, Italy’s private bank rescue fund expressed “strong reservations” about the terms of an MPS bridge loan that is key to its fortunes.

Chart via Bloomberg

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