Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

This weekend's Italian referendum will either seal a terrible year for European bank equity issuance or end 2016 with an unexpected party. Banks have raised a mere 5.1 billion euros ($5.4 billion) selling new shares on European exchanges so far in 2016, Bloomberg data show. There has been just one issue above 1 billion euros, ignoring CaixaBank SA's sale of 1.3 billion euros of existing treasury shares in September.

Law Of Small Numbers
Issuance of equity by banks has been pretty small scale in 2016
Source: Bloomberg
* sale of existing treasury shares owned by company

Rewind back to the end of 2015 and Standard Chartered Plc was raising 3.4 billion pounds ($4.2 billion) in a rights issue, while Credit Suisse Group AG was selling new shares worth 4.7 billion Swiss francs ($4.6 billion). From 2013 to 2015, banks sold 122 billion euros of new stock on European bourses.

The numbers are just as stark in deals if you add in existing bank shares too. Overall share sales of bank stocks on European exchanges are running at 10.9 billion euros so far, down from 40.4 billion euros last year.

As things stand, two Italian banks need to raise about twice this year's diminished level of issuance. Banca Monte dei Paschi de Siena Spa must find whatever part of 5 billion euros isn't delivered by this week's debt-for-equity swap. That might be as high as 4 billion euros. Analysts think Unicredit Spa requires at least 7 billion euros of fresh equity.

Empty Well
Sales of new bank shares on European exchanges have tumbled in 2016 after an earlier splurge
Source: Bloomberg

Markets have proved terrible at predicting politics this year, yet the poor performance of Italian banks and government debt shows investors believe the polls showing Italy will reject Matteo Renzi's constitutional reforms. If that happens, the government could fall, market volatility would spike and both Monte Paschi and Unicredit's plans would be in disarray.

But what if there's a surprise "yes"? Analysts at Exane reckon the market bounce would be much stronger than any downward correction on the expected "no". A rally might facilitate a rapid share placing for Monte Paschi. Unicredit would be able to announce a fundraising for early in the new year, just as it did at the end of 2011.

In turn, these deals would reopen the market for new bank equity. That would be especially good for Deutsche Bank AG. CEO John Cryan seems to want to make as much headway with the under-capitalized lender's restructuring before asking shareholders for help. Successful recapitalizations by Italian peers would certainly help the mood.

None of this will change the fact that 2016 has been an awful year for bank equity sales. That leaves a lot undone for 2017.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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