ITALIAN CONCERNS:SO, WHO'S laughing now? For years Italian banks have been criticised for a cautious business approach that has seen them operate a conservative lending market while relying heavily on a strong domestic deposit base.
In recent times the one exception to this policy was UniCredit which bills itself as a “truly European bank”, earning half of its revenues from outside Italy thanks to investments in Germany, eastern Europe and elsewhere.
Right now, however, the globalised approach is costing UniCredit dear – what once looked like a source of strength is now being perceived as a source of worry for investors.
Amidst concern about the bank’s “international” exposure and that it might have to be recapitalised, UniCredit shares went on a helter-skelter ride this week, at one point dropping 21 per cent to touch a 10-year low, forcing several suspensions of trading for excessive losses.
Concern about UniCredit prompted the treasury to state that the Bank of Italy and the finance ministry would take “the necessary measures to guarantee the stability of the banking system”.
Prime minister Silvio Berlusconi also promised Italians that they would not lose as much as “a single euro of their savings”, adding that Italy was ready to defend its banks against “speculative attacks”.
Allied to a declaration of support from UniCredit for its embattled chief executive Alessandro Profumo, the Italian government’s reassurances saw the UniCredit shares close up 11 per cent on Wednesday.
With rumours persisting that Mr Profumo was about to resign, the UniCredit chief executive seized the bull by the horns, giving an untypical interview on the prime time evening news of state broadcaster RAI in which he insisted that his bank’s finances were sound.
“I’m staying where I am, we are an extremely solid and healthy bank. . . We have a presence in many European countries and this should reassure our clients. . . Certainly this storm, which is also speculative, has shaken the whole system, but I believe we will see a bit of stability in the next few days.”
UniCredit is now one of Europe’s biggest banks, with its assets last year put at €1,000 billion.
