Banco Popolare Slumps Most Since 2008 on Share Sale Plan

Banco Popolare SC (BP), Italy’s fourth-biggest bank, was suspended from trade in Milan after slumping the most in more than five years on plans to sell as much as 1.5 billion euros ($2.1 billion) of shares to bolster capital.

Banco Popolare dropped 16 percent to 1.268 euros at 9:33 a.m. before the suspension, valuing the company at 2.24 billion euros. The losses exceeded a 10 percent limit allowed by the Italian exchange.

Banco Popolare’s rights offer will help repay 1 billion euros in convertible bonds and boost the bank’s common equity Tier 1 ratio under more stringent Basel III rules to about 10 percent, the Verona-based bank said after markets closed on Jan. 24. The bank said it will post a full-year loss for 2013 of about 600 million euros because of impairments and the higher cost of credit.

“Half of the capital hike goes to cover the losses and the banks’ fees, and the rest should hardly generate returns in excess of cost of capital,” Annamaria Benassi, an analyst at Kepler Cheuvreux who cut the stock to reduce from hold today, said in an e-mailed report to clients from Milan. HSBC Holdings Plc also reduced the share to underweight from neutral.

Chief Executive Officer Pier Francesco Saviotti is selling assets and cutting costs to bolster the bank’s financial strength and profit before a European Central Bank review of balance sheets. Banco Popolare, one of 15 Italian banks that will be evaluated in the ECB assessment this year, plans to present a new business plan next month.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Francesca Cinelli in Milan at fcinelli@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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