By Silvia Aloisi and Michel Rose
MILAN (Reuters) - Italy's Banca Popolare di Milano priced its 800 million euros ($1.1 billion) capital increase at 0.30 euros per share, it said in a statement on Friday, sending its shares down sharply.
The mid-tier lender's cash call, requested by the Bank of Italy, could be a litmus test of investor appetite for Italian banks at a time when several of them are readying cash calls to meet tougher European Union requirements.
BPM's new rights issue shares are to be issued at a 40.3 percent discount to the theoretical ex-right price (TERP). The capital increase is more than the bank's 650 million euros market capitalization at Thursday's close.
BPM's shares were suspended early on, and later started trading again, to fall 7.5 percent to 1.49 euros by 0952 GMT (5:52 a.m. EDT).
"It's clear that the conditions of the capital increase are more penalizing than the other banks' capital hikes, which are set at a discount of around 25 percent, but it was expected in a way," a Milan-based analyst said.
On Wednesday, European leaders agreed to force banks to raise more capital by June next year, to protect against losses from any Greek debt restructuring and to try to contain the region's financial crisis.
Pop Milano's rights issue offers 138 new shares for each existing 25 ordinary shares held by shareholders and is likely to run between October 31 and November 18, it said.
"It seems to me that in the light of the latest developments the 800 million increase is not enough," another Milan-based analyst said. "The original 1.2 billion hike would have been better but then it would have been almost impossible to get off the ground," he said.
BPM agreed the capital increase after a Bank of Italy audit in March criticized the bank's opaque governance structure and loan exposure.
Earlier this month, the bank set up a dual board system at the request of the regulator but resisted calls for a complete overhaul of its top ranks.
The capital increase is guaranteed by Barclays, BNP Paribas, Mediobanca, Nomura, Santander, Societe Generale, and Royal Bank of Scotland, as joint bookrunners, and by ING Bank NV, as co-bookrunner.
The banks have agreed to subscribe any shares that remained unsubscribed at the end of the auction on the stock exchange.
($1 = 0.707 Euros)
(Additional reporting by Stephen Jewkes, Nigel Tutt and Andrea Mandala; Editing by Jane Merriman and Helen Massy-Beresford)