You are Marta Oderzo, head of portfolio management at Banca Aurelia in Turin. Overnight, a hot inflation print pushed two-year yields up 90 basis points and ten-year yields up 60. At nine o'clock the investment committee wants your first read: how badly has the bank's €9.0 billion securities portfolio been hurt?
The situation
Banca Aurelia, founded in 1923, serves households and small firms across northern Italy through 210 branches: €38.0 billion of assets, €24.0 billion of deposits and €312 million of profit in 2025. Its CET1 capital ratio stands at 14.2%. The regulatory minimum is 11.0%, and the board has its own trigger at 12.0%: below it, the bank must file a remediation plan with the supervisor. Your portfolio is not the lending book but the bank's liquidity and earnings buffer: 20% equities and 80% bonds, built over eighteen calm months.
The numbers on your screen are specific. The bond book has a duration of 5.8 years, and the desk puts the mark at about 4%: roughly €290 million unrealised. The equity sleeve, about €1.8 billion, has fallen 8%: another €144 million. Management reckons the shock trims CET1 by 70 to 90 basis points. Separately, €180 million of losses sit on bonds held at amortised cost and do not touch capital today; they would only if those bonds were sold.
And €1.5 billion of rate-sensitive deposits could move to better-paying accounts elsewhere. Around the table, some expect the move to reverse within weeks; others expect a second leg. The committee has ten trading days to approve a diagnosis, a risk mandate and a reallocation of the portfolio. Today is the first of the three, and you bring the number.