UniCredit trade shows how Italy needs the ECB

Italian banks are paying up for funding, both a cause and effect of financial stress in the country. It shows why the European Central Bank is likely to continue with TLTRO (targeted longer-term refinancing operations), and why the Italian government has less leverage over Europe than meets the eye.

  • By Jasper Cox
  • 10 Jan 2019
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Last autumn, borrowing costs for households and businesses in Italy rose as drift and dread took hold in markets, even while the ECB’s own rates remained at rock bottom.

The apprehension eased as the government appeared to give in somewhat over its spending plans. But it could easily return. Italy’s disregard of Europe’s rules was demonstrated in its reaction to Banca Carige’s plight this week, while alarm is rising over slowing economic growth around the world.

Investor doubts remain. UniCredit stumped up a coupon of more than 6.5% this week just to receive three year senior funding (albeit in dollars and in non-preferred format).

This bank is Italy’s largest; smaller ones may not be able to issue at all.

And higher funding costs for banks, or even worse, a liquidity shortage, will inevitably ricochet back on the real economy, both directly and through the government’s own credit profile, given the intractable sovereign-bank nexus.

So how can the ECB help Italy, without rebooting QE? The answer is through TLTRO. It referred to this in minutes published on Thursday.

A Moody’s report last year showed that Italian banks had drawn €250bn from TLTRO, more than those in any other country and a third of the total.

Italy’s government does not want to let banks collapse — the Carige saga shows that. But the banks depend on the ECB's largesse. For all the government’s euroscepticism, it can only push so far.

  • By Jasper Cox
  • 10 Jan 2019

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 195,530.15 878 8.20%
2 Citi 184,076.24 754 7.72%
3 Bank of America Merrill Lynch 154,322.27 637 6.47%
4 Barclays 143,638.79 577 6.03%
5 HSBC 121,485.91 639 5.10%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Credit Agricole CIB 22,991.03 88 8.00%
2 BNP Paribas 22,856.10 93 7.96%
3 Bank of America Merrill Lynch 17,816.23 50 6.20%
4 UniCredit 13,146.65 71 4.58%
5 Deutsche Bank 13,089.86 49 4.56%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Morgan Stanley 6,646.08 29 10.31%
2 JPMorgan 6,222.43 38 9.66%
3 Goldman Sachs 5,596.92 27 8.68%
4 UBS 4,205.38 21 6.53%
5 Citi 4,178.15 30 6.48%