(Alliance News) - Banco BPM Spa has approached Banca Monte dei Paschi di Siena Spa to initiate talks regarding a potential business combination. The deal, structured as a 'merger of equals', aims to create Italy's second-largest banking group by size.

According to Banco BPM, the transaction would establish a new benchmark banking and financial group in the country. The plan seeks to preserve the brands, historical headquarters, and local presence of both institutions, while ensuring a governance structure based on balance and representativeness.

The bank estimates potential pre-tax synergies exceeding EUR1.1 billion, comprising over EUR650 million in cost synergies and more than EUR450 million in revenue synergies.

Of the latter, approximately EUR250 million would stem from increased commercial revenue across the networks, with around EUR200 million generated through the optimization of product factories.

The merger would also enhance the Mediobanca integration process already initiated by MPS and expand strategic options related to the stake held in Generali.

The combined entity could boast a market capitalization exceeding EUR50 billion, strengthening its capital markets presence and broadening its investor base.

Regarding capital position, Banco BPM indicates a pro-forma fully loaded CET1 ratio of approximately 15%, excluding any additional benefits from the extension of the so-called Danish Compromise to the Generali stake.

Shareholder value creation is estimated at no less than EUR5.5 billion, net of pre-tax integration costs of approximately EUR1.1 billion. Furthermore, the resulting group could generate a steady-state net profit of around EUR6 billion, with earnings per share accretion exceeding 10%.

Banco BPM stated its hope for a swift commencement of dialogue with MPS to assess the feasibility of the transaction and, subject to mutual interest, define the primary terms of the combination.

By Antonio Di Giorgio, Alliance News reporter

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