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Italian Banks Hit as Virus Lockdown Seen Undoing Years of Fixes

March 9, 2020, 1:07 PM

Europe’s biggest coronavirus outbreak threatens to send Italy’s banks back into crisis and undo years of painful restructuring, as the country’s financial capital goes into lockdown.

Shares of UniCredit SpA, Italy’s largest lender, led a selloff in European bank stocks Monday amid concerns that drastic measures announced for Italy’s prosperous north will make it harder for companies to service their debt. Depending on how long the lockdown lasts, it could boost bad loans that lenders have worked for years to reduce and revive the specter of bailouts.

“If we enter a recession and companies can’t produce or pay back ...