BNP Paribas announced a 4.3 billion euro ($6.3 billion) capital raising on Tuesday as France's biggest bank joined the ranks of top European lenders seeking to escape from state support.
Many banks that took billions of euros of government funds to bail them out of the global financial crisis are looking to raise money to repay the aid and free themselves from the conditions that were attached, such as limits on bonuses.
The trickle of deals and rumoured rights issues of the past two weeks threatens to become a flood, as banks rush to beat competitors to the market with outsized deals, taking advantage of higher stock prices and an apparent investor appetite to support fundraising.
It also follows calls from the Group of 20 economies, which met last week, for banks to boost their capital worldwide and to make it of a higher quality.
UniCredit SpA, Italy's largest bank, is set to announce a 4 billion euro capital hike after a Tuesday board meeting, turning down state aid and tapping the foundations that make up its core shareholding.
The hike would be aimed at boosting the core Tier I capital ratio of Italy's biggest bank towards 8 percent. Local competitor Intesa SanPaolo is also expected to announce a decision on government aid on Tuesday, although its strategy is less certain.
Switzerland's UBS AG also wants to cut government ties by buying its way out of a "bad bank" deal, its chief executive Oswald Gruebel said in an interview with the Financial Times, but may not be able to do so until late 2010.
"We think it is a good decision, to get rid of political repercussions on bonuses, dividend payments and acquisitions," Evolution Securities analyst Jaap Meijer said in a note on BNP Paribas.
BNP Paribas, France's biggest bank by market value, said its capital raising was part of a move to reimburse the government early on its 5.1 billion euros capital advance. The deal will free the bank from government conditions for financial help, including limits on bonuses.
Its fundraising came as sources confirmed BNP had been approached by the Dutch government to buy the commercial banking unit of nationalised Fortis Bank Nederland.
WILLING INVESTORS
The DJ STOXX European banks index rose 0.4 percent as investors reviewed the offerings.
In Britain, two banks under substantial state control are also mulling huge share issues. Royal Bank of Scotland Group Plc has been gauging investor appetite for a share issue of up to 4 billion pounds ($6.4 billion), a source familiar with the matter said earlier this month.
And Lloyds Banking Group Plc has said it is considering its own options.
Lloyds, which is reported to be targeting a raise of over 10 billion pounds, raised 4.3 billion in a share issue in June and used the funds to repay about 2.56 billion pounds to the UK government.
Raising capital may not be enough to free Lloyds from state intervention, though. European Competition Commissioner Neelie Kroes told the European Parliament on Tuesday that Lloyds must not be allowed to remain dominant in areas where it is already strong, a sharp warning as the EU reviews Lloyds' plans.
SOME SUCCESS ALREADY
In the last six weeks two Dutch institutions which have received state aid, insurer Aegon NV and bancassurer SNS Reaal, announced share issues to repay part of their aid packages.
Such deals follow those from U.S. banks that have started to extricate themselves from government aid or are paying fees to get out of restrictive asset-guarantee deals, such as Bank of America last week.
Morgan Stanley, JPMorgan Chase & Co and American Express Co said in June they would sell shares as they position themselves to repay billions of dollars borrowed under the U.S. Treasury's Troubled Asset Relief Program.
