UniCredit Directors to Meet on Capital Increase

By Steve Scherer and Lorenzo Totaro

Oct. 4 (Bloomberg) -- UniCredit SpA, Italy's biggest lender, will hold an extraordinary board meeting tomorrow to discuss a plan to boost its regulatory capital and settle investors' concern with its finances.

The Milan-based bank is considering paying its dividend in shares to hold on to about 3 billion euros ($4.1 billion) in cash and bolster its Core Tier 1 capital ratio, Il Sole-24 Ore and Ansa newswire reported today without citing anyone. Francesca Palermo, an UniCredit spokeswoman, declined to comment on the plan. The meeting will be in the afternoon, Ansa said.

UniCredit shares plummeted 24 percent during the first three days of last week. The stock then recovered some of the losses after Italy's stock-market regulator on Oct. 1 banned short sales of banking and insurance stocks, and Prime Minister Silvio Berlusconi said he ``won't permit speculative attacks'' on banks.

``I heard that Unicredit is planning a capital increase and it is not a reason for concern,'' Berlusconi told reporters today in Paris after a meeting of European leaders. ``It is a further guarantee that there are no dangers for the bank.''

Consob, Italy's market watchdog, may have uncovered a case of short selling of UniCredit shares borrowed and sold on Sept. 30 and not delivered back to the lender as of yesterday's deadline, Ansa reported, without citing anyone. Italy's finance police are investigating the whereabouts of 60 million UniCredit shares valued at about 180 million euros, Ansa said.

Spinoff

On Oct. 1, UniCredit announced it would spin off real- estate assets to boost its core Tier I capital ratio, a measure of financial strength, to a target of 6.2 percent by the end of the year, from 5.7 percent at the end of the second quarter.

UniCredit Chairman Dieter Rampl and Chief Executive Officer Alessandro Profumo are considering sales of other assets, both inside and outside of Italy, Il Sole reported today. Turkish bank Yapi & Kredi Bankasi AS may be one of the units sold, Sole said.

The financial crisis that left New York-based Lehman Brothers Holdings Inc. and Washington Mutual Inc. of Seattle bankrupt is spreading through Europe. Five banks were bailed out this past week by European governments.

UniCredit shares closed at 3.08 euros yesterday, up 9.6 percent from the previous day, though still down 7 percent compared with the previous week's close. The stock has fallen 46 percent since the start of the year, compared with a 35 percent drop in the Bloomberg Banks and Financial Services Index.

To contact the reporters on this story: Steve Scherer in Rome at scherer@bloomberg.net; Lorenzo Totaro in Paris at ltotaro@bloomberg.net