UniCredit writedowns ring alarm bells for Italian banks - Reuters

UniCredit was on the wires, via Reuters, as the bank has heavily written down the value of its 700 million euro ($756 million) investment in Italy's bank rescue fund and other investors are likely to follow suit complicating efforts to stabilize the nation's banking sector.

Key Highlights:

•Italy biggest bank has cut the value of its investment in the Atlante fund by significantly more than a third on its books.

•The move is part of UniCredit's plan to clean up its balance sheet before it taps the market for 13 billion euros in a share issue next week. 

•Intesa Sanpaolo, which together with UniCredit is Atlante's biggest investor, on Friday said it had written down the value of its stake in the fund by 33 percent.

•A group of about half a dozen other banks that have invested in Atlante have held a series of meetings in recent days to discuss the scale of their own possible writedowns. UniCredit's move is also likely to discourage the private sector from pumping any more money into Atlante to bail out weaker banks.

•Italian lenders are under pressure from the European Central Bank (ECB) to offload their soured debts, which now stand at 356 billion euros - a third of the euro zone's total - following the financial crisis and a deep recession.

•The market value of soured debts can vary, however, depending on the quality of collateral. The sources familiar with UniCredit's loans sale said its portfolio was diverse, with prices ranging from as little as 6 cents to more than 50 cents to the euro.