Two of Europe's largest banks stoked fears of a domino effect among the Continent's troubled financial institutions today as UniCredit and Danske moved to shore up investor confidence.

Announcing a suspension of its shares on the Milan Stock Exchange and a 25% cut in its forecast earnings for this year, UniCredit, Italy's largest bank, moved to raise €6.6 billion
(£5.1 billion) through a cash injection.

Danske, Denmark's leading financial group, said its profits in the third quarter of the year would be worse than expected, and it would be joining a two-year state guarantee to stand behind depositors' money, brought in by the Copenhagen government in a copycat move to those made by Ireland and Germany. Before the current financial crisis, UniCredit was among Europe's top five banks by assets.

Ahead of its share suspension today, UniCredit stock slumped 16%, close to an 11-year low.

Talking of an “unprecedented lack of trust among financial institutions”, chief executive Alessandro Profumo today said his bank had underestimated the significance of the collapse of Wall Street.

Calling for the raising of cash through bond issues, Profumo said: “In the last month, there have been significant and difficult changes. We have made some mistakes in evaluating the market scenario. That is absolutely clear to us.”

He added that his bank is looking to raise the money because of deteriorated market conditions and also because of UniCredit's failure to dispose of assets that it had previously signalled were up for sale.

Danske Bank today said it would be joining in the two-year deposit guarantee scheme.

It forecast that it will be liable for about a third of a fund to which Danish banks are expecting to contribute, and that its earnings would be hit as a result of that as well as the recent “aggravated financial turmoil”.