[Italy is crumbling, but it can’t go the way of Greece. It is a much larger economy than Greece, and Europe won’t be able to bail it out.]
Last spring, the government convinced around 70 banks and other financial institutions to put money into Atlante.
The fund was set up as a backstop to recapitalize [with 3.5 billion euro] two Veneto-based banks which were struggling … . Atlante now owns the two Veneto banks [but now they need another] 3 billion euros at least.
UniCredit has heavily written down [by more than a third, and maybe over two thirds] the value of its 700 million euro ($756 million) investment in [Atlante] and other investors are likely to follow suit, sources told Reuters, complicating efforts to stabilize the nation’s banking sector. …
UniCredit is indicating that it does not believe it will make money on the investment it made into the state-managed fund created to recapitalize a number of failing Italian banks and help the industry offload bad loans. …
Intesa Sanpaolo, which together with UniCredit is Atlante’s biggest investor, on Friday said it had written down the value of its stake in the fund by 33 percent.
A group of about half a dozen other banks that have invested in Atlante have held a series of meetings in recent days to discuss the scale of their own possible writedowns … .
UniCredit’s move is also likely to discourage the private sector from pumping any more money into Atlante to bail out weaker banks.
That in turn could put more pressure on Rome, increasing doubts over whether 20 billion euros set aside by the government to stabilize the euro zone’s fourth-biggest banking system will be enough … .
UniCredit has separately sold 18 billion euros of its bad loans at an average price of just 13 cents to the euro … . That price … sets a tough market precedent for other banks looking to offload their own piles of non-performing loans … . They have held on to them because they have been unwilling to sell at levels attractive to buyers, which would mean taking losses and burning through capital. On average, Italian banks still price their bad loans at just over 40 cents to the euro. …
[No doubt Deutsche Bank has exposure to this.]