Italy

Société Générale has hired a senior banker from Bank of America Merrill Lynch to become its head of global banking, investor solutions, coverage and investment banking in Italy.

If Banca Monte dei Paschi di Siena (MPS) is able to wrangle a recapitalisation that looks more like a bail-out than a bail-in, it will set a precedent for Europe's other weakest banks.

As plans for the bailout of Banca Monte dei Paschi take shape, attention is turning to how its shares could trade once the recapitalisation has taken place. The financial details are not clear yet, but it is likely to involve the creation of €5bn or more of new equity, held by the government and former owners of subordinated bonds.

The state bail-out of Banca Monte dei Paschi di Siena, announced during the night, has brought relief to the Italian financial system — at last, there is a plan for dealing with Italy’s weakest large bank. But there are already questions about whether it undermines Europe’s policy on dealing with bank failures.

A private sector recapitalisation of the ailing Italian bank, Monte dei Paschi di Siena, is looking increasingly unlikely, following the limited take-up for the liability management exercise and low interest in the equity raising, meaning that state-led intervention will now be needed.

Dedalus Holding, the Italian clinical health software company controlled by private equity firm Ardian, is set to list on the Third Market of the Vienna Börse a €72m floating rate note to refinance its debt.

Europe’s bank recovery and resolution directive (BRRD) could face an important first test this month if Banca Monte dei Paschi di Siena fails to complete its rescue plan. But market participants should not completely write off the new framework, even if the bail-in process does not pan out how they had hoped.

Conditions are far from ideal for the launch of Banca Monte dei Paschi’s €5bn equity capital raising, but the subscription period began this morning, with the original bank syndicate but no underwriting commitment.

UniCredit’s recent privately placed additional tier one outperformed the FIG secondary market on Monday, as analysts eyed a positive year for the asset class in 2017.

Banca Monte dei Paschi di Siena has re-opened its debt-for-equity swap and launched a share sale of up to €5bn, as it forces a final push to avoid a bail-in.

Financial credits and stocks were focal points for derivatives traders this week, with a big rally in banks aided by perceptions of a more hawkish stance on interest rate hikes by the US Federal Reserve. But although volatility has largely abated from credit and equity markets with the passing of the Fed meeting, traders warned that Banca Monte dei Paschi di Siena and the credit index options expiry next week could still bring upsets before the end of the year.

UniCredit privately bagged an extra €500m of additional tier one capital this week, ahead of an ambitious plan to bulk up its common equity and clean up its balance sheet.