By Lisa Jucca
MILAN (Reuters) - Italian banks, including Monte dei Paschi (MI:BMPS), can take advantage of investors' increasing willingness to bet on the country's economic revival as they seek to raise 11 billion euros (9.05 billion pounds) to strengthen their balance sheets.
Brokerages are recommending clients seize the opportunity to bolster their investments in Italy's lenders, while foreign investors pour money in to catch up with levels held before the economic crisis.
Eight out of 15 Italian lenders taking part in the European Central Bank-led review of the quality of banking assets have announced plans to tap investors, the largest number of bank share issues in any European country this year.
A ninth, Banca Popolare dell'Emilia Romagna (MI:EMII), is set to approve a share sale worth up to 800 million euros on Tuesday, a source close of the situation said on Monday.
"There is a lot of appetite for Italian assets right now. The share issues will be covered," a senior banker told Reuters.
Shares in Banca Popolare di Milano (BPM) showed that six of 12 banks at risk of failing the test are Italian, with Monte dei Paschi di Siena and smaller Genoa-based lender Carige (MI:CRGi) at the bottom of the list.
"The main reason why some Italian banks look weak is low profitability," RBS analyst Alberto Gallo said. "Spain and Ireland moved earlier to implement external stress tests on their banks, which benefited already in 2013 from the return of investor capital and lower (government bond) spreads."
Despite expectations of a relatively poor showing by Italian banks in the asset review, investors are playing catch up.
UniCredit Global Chief Economist Erik Nielsen estimates foreign holdings of Italian government debt are still about 200 billion euros below pre-crisis levels.
Banco Popolare (MI:BAPO), the first Italian bank to launch a share issue this year, successfully closed in mid-April a capital increase worth 1.5 billion euros.
In a further sign of investor favour, Italian banks, small and large alike, have also been able to raise more than 15 billion euros through the sale of corporate bonds this year.
"Contingent fiscal risks from the financial sector have declined as larger Italian banks took advantage of improved market conditions to strengthen capital ahead of the ECB's comprehensive asset quality review," Fitch Rating said upon improving Italy's outlook to stable at the end of April.
(Additional reporting by Valentina Za and Giulio Piovaccari, editing by Louise Heavens)