ITALIAN BANKS: To achieve 75% “provision-to-sell” coverage, the sector needs €20bn provisions and €25bn fresh capital, on top of the €20bn Public backstop fund. With this report we show that the market is pricing a capital shortfall risk, capping the upside potential. Italian banks’ PTBV may be higher than it appears for the risk on the share count deriving from the potential clean-up: including €25bn capital shortfall, the “real” PTBV17E would stand at 0.98x from 0.64x. We think ISP is the best way to play Italy.