Italy’s UniCredit could be obliged to sacrify its thriving businesses in Turkey or Poland as it faces a capital hole of up to 13 billion euros under stringent new rules for capital buffers.
The bank, which has lagged other Italian lenders in shoring up capital this year, will be in focus next week when politicians announce a make-or-break plan to stem Europe’s spiralling debt crisis and shore up banks.
Management may have to rethink its dismissal of speculation that it could sell Bank Pekao in Poland or Turkish Yapı&Kredi Bank, where Italy’s largest lender by assets sees its main growth prospects.
“In the new banking world, there will be no room for sacred cows,” said a banker familiar with the situation. “Preserving future growth is important but living through the current turmoil may be more important.”
Unicredit had a tier-one core capital ratio, which measures a bank’s financial strength from a regulator’s point of view, of 6.7 percent in July’s Europe-wide “stress test” probe into bank solidity, well above the 5 percent hurdle.
But with only eight out of 90 banks failing to pass, the tests are now seen as having been too weak, and analysts agree Unicredit needs some 4 to 5 billion euros in extra capital.
And if the benchmark in new stress tests taking place currently were to rise to 9 percent, Unicredit would need 13 billion euros of extra capital, acording to a Citi report.
Its banking units in Turkey and Poland would meet a lot of appetite — as evidenced by the sale of KBC’s Kredyt Bank and Dexia’s Denizbank — and could help the bank to easily raise several billion of euros. But selling Poland or Turkey would compromise Unicredit’s growth prospects as the bank makes 60 percent of its revenues abroad, according to one analyst, who asked not to be named.
It would also make it hard to convince its shareholders to support a third rights issue in so many years, after luring them by boasting about Eastern Europe’s growth prospects.