LONDON Shares in UniCredit, Italy's largest banks, were set for their best day in more than six years as a planned cash call and restructuring plan to help shore up its balance sheet was cheered by investors and also spurred short-covering.
UniCredit was last up 14 percent after briefly being halted for volatility. The bank outlined plans earlier in the day to raise 13 billion euros (10.87 billion pound) in the country's biggest-ever share issue and cut jobs.
Italy's banking index .FTIT8300 rose more than 5 percent.
UniCredit's gains saw the stock finally recover its losses since the United Kingdom's Brexit vote in June which spurred a selloff across periphery bank stocks with Italy's banking stocks the hardest hit.
Traders said the bank's plans to bolster its balance sheet had prompted some investors to pare back bearish bets on the stock which remain significant.
While off the peaks seen mid-year, more than 14 percent of the shares available to borrow were out on loan as of Monday's close, according to data from Astec Analytics.
Italian stocks dominated trading across Europe on Wednesday with UniCredit's gains second only to a 34 percent rally on Mediaset (MS.MI).
(Reporting by Alistair Smout, Editing by Vikram Subhedar)