Intesa Sanpaolo has formed a consortium to manage the capital hike it could approve on Tuesday, a source close to the matter said on Monday, as the race to boost capital buffers intensifies.
The board of Intesa Sanpaolo, Italy's biggest retail bank, will meet on Tuesday to consider a cash injection of 5 billion euros ($7.1 billion), banking sources told Reuters on Saturday.
The Intesa capital increase consortium will be formed of 12 banks with Intesa unit Banca IMI and BofA-Merrill Lynch as global coordinators and joint bookrunners, the source said.
Credit Suisse, Deutsche Bank, Morgan Stanley and Goldman Sachs will also be part of the consortium as joint bookrunners, the source said.
The capital hike would boost Intesa's core Tier 1 ratio by 150 basis points, analysts said. The move would allow it to lift this key measure of capital strength close to the 10 percent that Italian regulators may consider a benchmark for big banks.
Monte Paschi, Italy's No. 4 bank by market value, is mulling raising its capital by around 2 billion euros ($2.8 billion), joining an increasing number of Italian banks tapping investors, two newspapers reported at the weekend.
On Monday, Monte Paschi's Tier 1 ratio was boosted by 40 basis points to 8.8 percent, based on end-2010 data, after it took advantage of recent Italian legislation, it said. The bank is using a decree allowing the sector to treat deferred tax assets as capital, it said.
A Milan analyst, who asked to be unnamed, said the MPS move was expected, adding it did not remove the need for a possible capital increase to repay government-backed bonds worth about 160 basis points on its capital.
The MPS banking foundation, which controls 56 percent of the bank, has started to study the idea of selling non-strategic assets including a 0.4 percent stake in Intesa Sanpaolo, a source said on Monday.
A decision on asset sales by the Foundation will be taken after its management meets Italy's Treasury Minister Giulio Tremonti on April 6, the source said.
Siena-based Monte Paschi, the world's oldest lender, is considered one of Italy's weakest after barely making it through a first round of European banking stress tests last year.
Executives were mum about a capital increase when the bank announced 2010 results last week.
Shares in Intesa Sanpaolo closed up 0.95 percent, while Monte Paschi ended down 1.85 percent, both well off early session losses.
The STOXX 600 European banking index was down 0.73 percent.
Analysts at Nomura said capital remained Monte Paschi's soft spot as results of a second round of stress tests loomed.
"We estimate core Tier 1 ratio of 6 percent ... We believe the market will continue to focus on a potential capital increase, which the recent move from UBI Banca may have accelerated." In the rush to meet new Basel III capital requirements, Banco Popolare completed a 2 billion euro ($2.8 billion) capital hike in February.
UBI Banca, the country's No. 5 lender, said last week it would tap the market for up to 1 billion euros.
If Intesa Sanpaolo and Monte Paschi joined in, the Italian market would be flooded with requests for fresh bank capital amounting to 8 billion euros ($11.3 billion).
However, Italy's biggest bank by market value UniCredit does not immediately plan a cash injection.
"We will see what Intesa will decide. As far as we're concerned we're comfortable with our capital levels," chief executive Federico Ghizzoni said on Saturday.
UniCredit, hit harder than others by subprime woes, was forced to tap investors for cash in the credit crisis.
Analysts do not rule out a further capital increase by UniCredit later in the year. They expect mid-tier player Banca Popolare di Milano, which has resisted a possible 600 million euro ($852 million) cash injection, to also tap shareholders.