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UniCredit drops on ECB concerns about bank's credit quality
[ZURICH] UniCredit SpA dropped in Milan trading after it said the European Central Bank had demanded an improved plan for dealing with bad loans by Feb 28.
Italy's biggest bank said that a plan presented in December for shoring up its finances may not adequately address the ECB's concerns about credit quality, according to a statement Monday detailing the company's plans for a 13 billion-euro (S$19.931 billion) capital increase. UniCredit intends to use more than eight billion euros in fresh funding to absorb losses on loans that it expects to sell to investors at a discount.
The shares were down 5.7 per cent at 26.12 euros as of 10.59am in Milan. That compares with a decline of 1.3 per cent in the Europe Stoxx 600 Banks index.
The bank won permission from investors last month for a rights offer to carry out a turnaround strategy under chief executive officer Jean Pierre Mustier. The offer represents almost as much as the bank's market value of 16.5 billion euros.