Italian banks head toward consolidation driven by costs

(Alliance News) - The new season of mergers and acquisitions in the Italian banking sector is being fueled not only by the strategies of major institutions but also by structural factors, as reported by Corriere della Sera on Monday.

On one hand, the FTSE MIB returned above the 50,000-point mark on May 14 for the first time since the turn of the century, posting a gain of approximately 24% over the last year; on the other, there is a growing need for cybersecurity investment after the European Central Bank called on the Eurozone's leading banks to bolster their digital defenses.

The composition of the Milanese index has changed profoundly since 2000. According to Brightside Capital, telecommunications and technology then represented 40% of the index, whereas today they account for a mere 1.4%.

Banks, meanwhile, have moved from a marginal role to representing 37% of the Italian stock market's value.

This context sets the stage for the M&A maneuvering involving Banco BPM, Banca Monte dei Paschi di Siena, Intesa Sanpaolo, BPER Banca, UniCredit, Mediobanca, and Generali.

Banco BPM CEO Giuseppe Castagna reportedly reacted to the prospect of a potential deal between Intesa Sanpaolo and BPER regarding MPS by proposing a 'merger of equals' with the Sienese lender. The proposal was unanimously approved by the Banco BPM board, including representatives from Crédit Agricole, its largest shareholder.

On the opposing side, Intesa Sanpaolo and BPER can rely on significantly superior financial strength. Together, they are worth approximately 4.5 times the market capitalization of MPS and could present a more compelling offer. If successful, BPER would integrate the Sienese commercial network, creating Italy's third-largest banking group by market share, trailing closely behind UniCredit.

For Intesa Sanpaolo, the strategic objective would also include access to the 13% stake in Generali held by Mediobanca, alongside consumer credit and investment banking operations, and an international insurance network with nearly EUR800 billion in assets under management.

Finally, UniCredit and its CEO Andrea Orcel remain the wildcard; Orcel holds a stake of nearly 9% in Generali and continues to be viewed as a potential key player in the upcoming moves of Italian banking consolidation.

By Antonio Di Giorgio, Alliance News reporter

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