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SocGen Weighs Cost of a Clean-Up at Italian Banks, Trims PTs 2013-11-25 06:52:40.840 GMT
By Francesca Cinelli Nov. 25 (Bloomberg) -- Calculates EU44b extra-provision needed to normalize bad loans inventory level. * Excluding collateral coverage, SocGen sensitivity analysis of bad loans portfolio indicates that 40% markdown would reduce bad loans inventory ratio to 77% from ~120% almost in line with eurozone avg; but it would also bring a EU19b capital shortfall * Says such extremely harsh scenario could be manageable as, on SocGen calculations, banks may have total capital buffer of nearly EU8b stemming from shortfall of provisions to expected losses, already deducted from capital, and possibility of new LLP deductibility law being passed * Says using some of collateral to offset bad loans could further reduce bill * Keeps cautious view on Italy, keeping UniCredit as top pick * UniCredit PT cut to EU6.1 vs EU6.2; kept at buy * Intesa PT cut to EU1.8 vs EU1.85; kept at hold * Monte Paschi PT kept at EU0.14; sell rating unchanged * UBI PT cut to EU5.05 vs EU5.1; kept at hold * Banco Popolare PT cut to EU1.2 vs EU1.3; kept at sell * Pop. Milano PT kept at EU0.37; sell rating unchanged
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To contact the editor responsible for this story: Francesca Cinelli at +39-02-80644-252 or fcinelli@bloomberg.net