Italian Banks Point to Serious Liquidity Problems

If recent reports are true, certain Italian banks are suffering serious liquidity problems as they struggle to fund their balance sheets

Holly Cook 18 November, 2011 | 3:33PM
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Multiple reports emerged earlier this week claiming that UniCredit's (UCG) CEO has asked the European Central Bank to extend access to ECB funding for Italian banks by widening the range of collateral that can be offered to get funds. Morningstar banking analyst Erin Davis commented following the report that, if true, this points to serious liquidity problems for certain Italian banks as they find it difficult to fund their balance sheets.

Rumours have also been circulating that a rating agency is putting UniCredit on review for downgrade. While most of the agencies rate UniCredit and its largest Italian competitor, Intesa Sanpaolo (ISP) in the mid-A range, Morningstar rates both banks at the BBB level. "We always have taken a much harsher view of the Italian sovereign debt situation and its effects on Italian banks, and recent news out of the country only confirms our outlook," Davis said, adding that the situation is very fluid and our equity analysts are monitoring events closely.

Read Davis' research report on Unicredit here, and on Intesa Sanpaolo here. Morningstar research is available to Premium subscribers--find out more here.

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Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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