CORRECTED – UPDATE 3-Banco Popolare joins European peers with cap hike

(Updates share price in fifth bullet point)

* 2-bln-euro rights issue to be carried out by Q1 2011

* Fresh capital to boost ratios, reimburse govt-backed bonds

* Market speculates Monte Paschi will also do cap hike

* Monte Paschi denies planning issue

* Popolare shares down 4.6 pct; Monte Paschi down 3.3 pct

(Adds chairman comments; updates shares)

By Ian Simpson and Nigel Tutt

MILAN, Oct 25 (BestGrowthStock) – Italy’s Banco Popolare (BAPO.MI: )
joined European banks in tapping investors to help meet new
global rules with plans for a big capital hike, triggering fears
Banca Monte dei Paschi di Siena (BMPS.MI: ) will follow suit.

Shares in Verona-based Banco Popolare, Italy’s No. 7 bank by
market value, fell more than 4 percent on Monday after it said
the previous day it would launch a rights issue of up to 2
billion euros ($2.78 billion), a roughly 70 percent increase
over its market value.

“We have decided to launch the capital hike after having
seen that some European groups had taken steps to boost their
capital base,” Banco Popolare Chairman Carlo Fratta Pasini was
quoted as saying by local daily L’Arena.

“Some Italian banks could soon do the same,” he added.

The bank, one of Italy’s weakest lenders due to a Core Tier
1 ratio of 6.1 percent, is the first Italian bank to seek
capital after the release of the Basel III global capital
guidelines for lenders last month.


Graphic on Italian banks’ Tier 1 ratio

Breakingviews on Popolare [ID:nLDE69O0OH]


Popolare’s capital raising comes hot on the heels of a
proposed $5.3 billion capital increase by Britain’s Standard
Chartered Plc (STAN.L: ) and Deutsche Bank (DBKGn.DE: ) raising 10.2
bilion euros earlier this month. [ID:nSGE69C01A] [ID:nLDE6950F9]

The Basel III rules, completed in September, require lenders
to hold more high-quality capital against risks and tighten the
definition of what qualifies as top-tier capital.

“In the last three weeks you have had the Standard Chartered
rights issue, and then other rights issues,” said a Milan-based
trader. “This is going to be a huge theme.”

Popolare’s move comes as the quarterly earnings season is
under way, with Switzerland’s UBS (UBSN.VX: ) reporting on
Tuesday. Credit Suisse’s (CSGN.VX: )> net profit undershot
forecasts last week as sluggish equities trading cut into
investment banking profits. [ID:nLDE69K03R]


Italian banks, which have yet to report quarterly earnings,
were relatively unscathed by the financial crisis triggered by
the 2008 collapse of U.S. bank Lehman Brothers (LEHMQ.PK: ).

However, the crisis has prompted them to raise capital
ratios that had been at the low end among big European lenders.

UniCredit (CRDI.MI: ), Italy’s top bank, has carried out two
capital increases totally 7 billion euros in less than a year.

Popolare’s capital hike announcement triggered market
speculation Monte dei Paschi, Italy’s No.3 lender with a Tier 1
ratio of 7.8 percent, would follow suit. The bank, the world’s
oldest, barely cleared a European banking stress test in June.

Monte dei Paschi denied it was considering a capital hike
and said it would boost its capital by internal means.

Popolare shares were down 4.6 percent at 4.10 euros by 1345
GMT, off a four-and-one-half-month low in earlier trade. Monte
dei Paschi was down 3.3 percent at 1.05 euros and the STOXX
Europe 600 banking index (.SX7P: ) was down 0.8 percent.

The hike will go to pay back 1.45 billion euros in
government-backed bonds the Italian Treasury offered to banks in
the credit crisis and to support lending. It will be carried out
in a single tranche by the first quarter of next year.

The bank has been weighed by its Banca Italease leasing
affiliate, which posted a 1.9-billion-euro loss in 2007-09.
(Additional reporting by Lisa Jucca; Editing by Sharon Lindores
and Karen Foster)
($1=.7187 Euro)

CORRECTED – UPDATE 3-Banco Popolare joins European peers with cap hike