Humble pie was on the menu at Unicredit on Monday. Usually-assertive chief executive Alessandro Profumo admitted he had “underestimated market conditions” and “made obvious errors of judgment.” Italy’s most international bank is now to do what it had categorically ruled out only three days ago. There will be a capital hike of €6.6bn; €3bn raised from a share issue and €3.6bn from paying the dividend in shares instead of cash – an innovative move for an Italian bank.

The goal is to reach a Core Tier ratio of 6.7 per cent by the end of the year. Earnings forecasts have also been cut drastically to €0.39 per share from €0.52. Mr Profumo, who until last week seemed to have the strength of a Mr Incredible, is now trying to show that he also has the flexibility of an Elastigirl.

Sticking to your guns is not a virtue if they are pointed against you, so he should be commended for acting to save the bank. Even so, his credibility is being questioned as doubts grow over management’s decision to wait so long to act, especially after Unicredit’s stock price tumbled last week.

It is this - as well as the profit warning, the prospect of earnings dilution and uncertainty over Germany, where the bank is a major player - that at one point knocked Unicredit’s shares 14 per cent on Monday. On the positive side, Uncredit’s plan strengthens capital ratios and removes some uncertainty. Mr Profumo insists the crisis has so far had no impact on deposits and that funding is not an issue.

Moreover, Unicredit’s most powerful shareholders, the Italian banking foundations that own 12 per cent of the firm, are also firmly on board, having agreed to underwrite the rights issue. When calm returns to the markets, Unicredit hopes this will allow the bank’s core strengths to be recognised again. But, as even Mr Profumo now admits, nothing can be taken for granted.

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