Fees to borrow Italian banks rising despite short selling bans

Fees to borrow Italian banks rising despite short selling bans

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Demand to borrow Italian bank shares is continuing to rise as the country’s troubled lenders tap equity markets to raise capital.

A bad debt mountain has heightened concerns about the strength of the overall sector and led to Italian bank shares tumbling this year.

Poor stress test results have placed additional pressure on shares of late as many lenders need to bolster their balance sheets to shore up their capital ratios.

Monte dei Paschi emerged as the country's worst performing bank in the European-wide stress tests at the end of July .

Italy’s largest lender, UniCredit, was also among the banks that fared badly.

Although Italian regulator CONSOB has extended its short ban on Monte dei Paschi until October 5th, BBH experts said there is "strong demand to borrow" as a €5bn rights issue is imminent.

“Appetite for Unicredit has steadily increased as the company has plans for a rights issuance in early 2017," analysts at BBH added on the firm's online MindontheMarkets blog this week.

“The market is awaiting rights details in both names, but healthy spread between ordinary shares and rights are expected, and fees are anticipated to trade in the moderate to high range.”

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