ITALIAN BANKS: We are selectively constructive on Italian banks as we expect cost of risk to normalize and see restructuring momentum. At an average 2018E P/TBV of 0.8x, Italian banks are trading on a 1% relative premium, with the discount to Eurozone peers more than offset by their lower profitability. This report also includes our proprietary analysis of the ECB’s provisioning guidance and its potential impact on Core Tier 1 ratios. We reinstate coverage of UBI with an Outperform rating, Unicredit with a Neutral and Monte dei Paschi di Siena with an Underperform rating. UBI and Intesa-Sanpaolo (Outperform) are our top picks in Italy.