Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 03 November 2014 at 10:03 GMT

Paschi shares up 5%, but it's still fighting for survival

Head of Equity Strategy / Saxo Bank
  • World’s oldest surviving bank plans rights issue after ECB stress test fail
  • Bank is trying to raise EUR2.1bn
  • Shares rise 5% after French insurer Axa says it will participate in capital raise

By Peter Garnry 

Banca Monte dei Paschi di Siena was one of the banks to fail the European Central Bank's stress test, and the one with the largest capital shortfall. 

After hiring advisers to help with its strategic options, the Italian bank is now trying to raise EUR 2.1 billion in capital from investors, creating a massive dilution to existing shareholders, which we believe is the least viable option for the bank. It has until November 10 to submit its capital plan.

Most traded European stocks

Shares are up 5% today (see table above) as one of its major shareholders, the French insurer Axa, says it will participate in proportion to its current shareholding. Axa owns 3.7% of Paschi. 

This sends a positive signal to other shareholders, but it may not be enough. Paschi raised EUR5bn earlier this year to prepare for the stress test, but the bank's calculations were apparently far off the mark of what was needed against its loan book. This may cause some investors to bark at chipping in another EUR2.1bn.

Paschi share price 
Paschi share price
Source: Saxo Bank  

– Edited by Oliver Morrison

Peter Garnry is head of equity strategy at Saxo Bank 
Peter Garnry Peter Garnry
BMPS continues higher today up 9.3% as sentiment rises on news that NIT Holdings, Hong Kong based investment firm, is willing to invest to invest €10 billion in the Italian bank


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