UPDATE 1-UniCredit capital hike nets 99.8 pct take-up
(Adds details of share offer, background on euro zone lenders)
* 7.5 bln euro offering closed on Friday
* Test of market appetite for European banks
By Silvia Aloisi
MILAN, Jan 27 (Reuters) - UniCredit (CRDI.MI) closed its 7.5 billion euro ($9.7 billion) rights issue on Friday with a 99.8 percent take-up, allowing Italy's largest bank by assets to meet tougher capital requirements being imposed on the euro zone's lenders.
UniCredit was the first European lender to tap the market after the European Banking Authority told banks they needed to find 115 billion euros to withstand the region's sovereign debt crisis.
After a turbulent start on Jan. 9 which prompted a sharp fall in the share price, the success of the rights issue means UniCredit has almost entirely plugged the 8 billion-euro capital shortfall identified by the EBA - the second-biggest deficit in Europe after Spain's Santander (SAN.MC).
The cash call will bring the Italian lender's core Tier 1 capital adequacy ratio above the required target of 9 percent of risk-adjusted assets.
The two-for-one share offer had been priced at a steep discount, reflecting difficult market conditions. It will dilute 2012 earnings per share by around 65 percent, according to analysts' estimates. Sources close to the underwriting consortium have said that the rights issue had drawn interest from U.S. institutional investors and from Nordic countries. U.S. fund Capital Research and Management has taken a 5.4 percent stake, while BlackRock Inc (BLK.N) has a 3.1 percent holding, according to stake disclosures to Italy's market watchdog. U.S. investors helped offset the defection of some core shareholders, such as the Libyan central bank and the Libyan Investment Authority, which did not subscribe to the capital increase. DEBT JITTERS Looking ahead, Italy's largest bank by assets remains vulnerable to the country's sovereign debt woes, analysts say, with already low profitability further dented by the dilutive cash call and question marks hanging over its strategy. Despite having the biggest international reach among Italian lenders, with operations in 22 countries and 950 billion euros in assets, UniCredit makes 42 percent of its revenue in its home market -- making it vulnerable to a likely recession in Italy this year.
It also has 38 billion euros of Italian government bonds on its books, accounting for 43 percent of its total exposure to sovereign debt. UniCredit's shares have borne the brunt of a market sell-off in Italian assets.
Even taking into account the rights issue, its market capitalisation is now below 21 billion euros ($27.58 billion), a far cry from the 75 billion euros former chief executive Alessandro Profumo could boast of just four years ago after a buying spree in central and eastern Europe.
That acquisition drive turned UniCredit into the biggest lender in Austria and in several central and eastern European countries, and gave it the third spot in Germany. But at a price. As Italy and its banks got sucked ever deeper into the debt crisis the lender revealed a 10.6 billion euro third-quarter loss in November due to big writedowns on the book value of those deals. CEO Federico Ghizzoni came under heavy criticism for waiting too long to launch the rights issue, and the initial market reaction to the discount offered was a disaster -- the stock plunged 45 percent in the space of four days. But the shares then recovered, also helped by a more positive general market mood on euro zone assets.
($1 = 0.7615 euros)
(Reporting By Silvia Aloisi, editing by Matthew Lewis)
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