Italy's largest lender, UniCredit, is set to announce next week the country's biggest bank share issue, worth up to €13 billion, in what would be a major test of confidence in Italy's wider banking system.
If successful, the fundraising would be a shot in the arm for a sector overburdened by bad loans.
It is also being buffeted by political uncertainty and dogged by the risk its third-largest lender, Monte dei Paschi di Siena, could be nationalised.
UniCredit operates in 17 countries and is the only Italian bank whose health is deemed important to the stability of the global financial system.
But it needs to strengthen its balance sheet to meet tough new regulations designed for such lenders.
The bank's chief executive Jean-Pierre Mustier, drafted in this year to boost capital and profits at Italy's biggest bank, is set to present his strategic review on Tuesday.
Sources familiar with UniCredit's thinking said he could announce the cash call for early next year.
Mustier would face a harsh investment climate - Prime Minister Matteo Renzi quit this week after a heavy referendum defeat, raising the prospect of early elections, and Monte dei Paschi may need a state bailout after investors balked at funding the bank's own €5 billion rescue plan.
Other, smaller banks are also lining up for cash. Credit rating agency Moody's cut its outlook on Italy earlier this week, saying prospects for much-needed economic reform had shrunk after Renzi's departure.
But Mustier has said Renzi's resignation and the threat of early elections next year will not change his thinking.
"The event overnight will not change our strategy and we plan for the long term," he told Bloomberg TV on Monday, after Renzi announced the night before that he would quit to take responsibility for the defeat of his constitutional reform plan.
Mustier, a former Societe Generale executive, was appointed to run UniCredit in July. The bank has been selling assets and has said a share sale is an option.
UniCredit, with a market value of €15 billion, has lost more than half its value this year, weighed down by concerns over profitability, bad loans and a weaker balance sheet compared with major European rivals.
In June, a source said Mustier, hired for his experience in managing complex operations at a big bank, was looking to raise core capital - a key measure of financial strength - to 12.5%.
By the end of September, the bank's fully-loaded CET 1 ratio was 10.82%.
UniCredit, which has Europe's biggest bad loan portfolio, is also expected to reveal plans to dispose of as much as €20 billion worth of non-performing loans, sources have said.
Mustier has begun selling assets and slimming down the bank, making it easier to manage.
It is in exclusive talks with France's Amundi to sell its asset manager Pioneer in a deal that could raise around €3.5 billion. This week it also announced deals to exit its Polish unit Pekao, raising more than €2.5 billion.
