“The Italian banking index is down 18% this year, and Italy’s third-largest and most historically troubled bank, Monte dei Paschi, has lost 50% of its value during the same period. The most dramatic drops have taken place this week. The Italian stock market regulator has deemed it necessary to ban short selling on Monte dei Paschi stock in an attempt to prevent speculators from benefiting by driving it lower, yet it continues to fall,” reports MarketWatch.
Last year, reforms to Italy’s banking sector were seen as a potential driver of improved equity market performance. Specifically, the reforms would turn these types of banks into possible takeover targets almost instantly. For instance, the new rules could be a catalyst for a potential merger between UBI Banca and Banca Monte dei Paschi di Siena. [Catalysts for the Italy ETF]
“Italy’s banks are indeed troubled; their non-performing loans amount to more than 200 billion euros (about $218 billion), and Monte dei Paschi had an extremely weak balance sheet long before a 2013 derivatives scandal dealt it another blow. But those non-performing loans have been growing ever since 2008, and that growth has slowed of late,” adds MarketWatch.
iShares MSCI Italy Capped ETF
