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The starting gun has sounded on European bank consolidation, with BBVA’s hostile approach for Spanish rival Sabadell. In Italy — once expected to lead this race — the pace seems more subdued.
Banco BPM boss Giuseppe Castagna last week stated that conditions were not right for a deal with state-owned Monte dei Paschi and would not be before 2026.
But consolidation is coming — and BPM, also known as Bami, will be a key part of it. Castagna’s timeframe appears pessimistic. The country is approaching a goldilocks moment when the politics and economics are right to get a deal done. Key players, notably UniCredit’s chief executive Andrea Orcel, have staked their reputations on being ready to take advantage.
It all comes down to valuation. Italian banks and their shareholders made hay, across the board, as interest rates rose. As the sun sets on this rate cycle, their fortunes will diverge giving buyers their opportunity.
UniCredit rejected a state-backed tie-up with MPS in 2021. Orcel walked away from a deal judging it poor value. But, helped by higher rates, MPS is now in recovery mode: it reported a CET1 ratio of 18 per cent in the first quarter.
MPS is an obvious participant in consolidation with the government a willing vendor, holding just over a quarter of the shares. Giorgia Meloni’s ruling coalition would probably prefer a privately struck deal over a state-induced solution.
The overhang of its stake, plus MPS’s chequered history, has put off investors and buyers in the past. But the bank’s shares have soared this year alongside peers such as Bami, UniCredit and BPER . Still, MPS is valued at 0.6 times tangible book value compared with its peers now closer to book.
A Bami/MPS deal is certainly a possibility. But Bami is also the preferred and long-mooted option for UniCredit. Were Orcel to stand by, a combination of Bami and MPS would be bigger in terms of market share in Italy than UniCredit, limiting its options to grow domestically.
Another candidate for consolidation, BPER is essentially off the market thanks to the controlling stake of insurer Unipol. For UniCredit in particular, with its insurance business, that overlap would present complications in terms of limits on distribution.
Orcel is biding his time. Bami is more exposed to falling interest rates than UniCredit. It is the ECB’s next move, perhaps as soon as Thursday, that will determine when the time is just right to make a move.
andrew.whiffin@ft.com
