Italian banks under pressure

Morgan Stanley is reporting an explanation on why recently Italian banks seem to be at the center of the interest of speculators. Italian banks are accounting for the three most active positions in Goldman's Dark Pool. For the second day in a row, the most actives continue to be UniCredit and Banca Monte dei Paschi di Siena (Intesa has fallen from 3rd to 12):

There are some speculations in the local papers that the disagreement between PM Berlusconi and Finance Minister Tremonti has reached a new peak again and that Tremonti may threaten to resign again and this time Berlusconi may be prepared to accept.

Given Mr Tremonti stronger reputation (and Berlusconi's weaker stance esp in the international community), if confirmed this is clearly not helpful for Italy especially at this very sensitive moment

The same papers also indicate that Bini Smaghi (who has to resign from his post as ECB board member given Draghi's appointment) could be appointed should Tremonti go (and he would be a well respected high level appoiontment)

None of this is confirmed and it is not obvious even whether Tremonti would resign, but the uncertainty in itself at a very difficult moment for the sovereign (and the already not very stable political situation in Italy) is not helpful for the market in my view. This comes after Moodys changed outlook for Italy to negative last week

We have seen macro funds (esp credit but also equity) effectively selling Italy since Friday (both on stand-lone concerns for the sovereign) but also as a way to position more negatively on Southern Europe

Italian banks have been significantly impacted recently and some show cheap values (ISP for example which is fully recap'd to 10% CT1 but trades below 0.8x NAV), but I would just be reluctant to get involved as yet as the situation unfolds in Italy but also in Southern Europe, as this is still very fluid. And I think the way bank stocks traded today (with Italians in the red in a green screen) tells me that investors are cautious too.