Teetering Italian bank looks for investors

“People had gone into the referendum with a very pessimisticview and I think the last five years have taught us that, as faras the euro is concerned, political issues often don’t have alasting impact”, DZ Bank currency analyst Sonja Marten said.

Then the endless Draghi bailout of Italy’s zombie banks will end; and that, hopefully, in an orderly way through the institution of the Glass-Steagall legislation which the failed Renzi government has been blocking.

Fitch noted a bail-in of creditors, which is now standard practice in the eurozone, “would be politically problematic as bank debt is widely held by retail customers”.

The defeat, which most obviously strengthens the anti-politics Five Star movement and the rightwing Northern League, is seen as the latest defeat for centrism, following the shock election of president Trump and Britain’s rejection of the EU. This marks the worst performance for the organisation since September 2012.

Shares in MPS, which have fallen 86 per cent over the past year, fell 3 per cent by early afternoon on Monday amid volatile trading after the Italian referendum result.

Total non-performing loans (NPLs) at Italian banks at the end of past year were almost 360 billion euros ($386 billion), according to the International Monetary Fund (IMF).

BMPS has been at the epicenter of the Italian banking crisis, saddled with an unsustainable level of nonperforming loans and a hole in its capital cushion. Billions of euros in loans have soured due to economic stagnation.

“The large volume of NPLs is mostly the result of the profound recession”, stated the International Monetary Fund. Small savers reportedly own $250 billion worth of Italian bank bonds.

GKN also got a broker note boost as Bank of America-Merrill Lynch upgraded its stance on the shares to “buy” from “neutral” and upped the price target to 365p from 350p. This practice is dubbed “kissing shares”, according to a Financial Times report.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 per cent, while Japan’s Nikkei added 0.7 per cent.

Italy’s Monte dei Paschi di Siena is trying to salvage a rescue plan that would see investors inject €5 billion ($5.4 billion) into the bank.

MPS came under the spotlight during the stress tests by the European Banking Authority in July.

After a tepid week marked by thin trading ahead of the Italian referendum, European equities shrugged off the outcome to head for their biggest gain since the US election.

Renzi’s resignation has some market observers pondering the fate of Italian banks, which were already among the least healthy in the developed world.

Tomas Kinmonth, fixed income strategist at ABN Amro, said a €1bn complex debt structuring completed on Tuesday “will assist in the capitalisation of the struggling Italian bank”.

The news gave the rest of the sector a lift with shares in HSBC, Royal Bank of Scotland and Standard Chartered in the black.