Over the years, European policymakers have expressed a desire for larger banks across the continent. Italy, in particular, has been a focal point for potential mergers and acquisitions in the banking sector. Following a sovereign debt crisis and a government rescue of Banca Monte dei Paschi (BMPS), there is a renewed interest in the Italian banking industry.
When examining individual banks in Italy, it becomes apparent that changes are imminent. Antonio Reale, co-head of European banks at Bank of America, believes that significant developments may unfold within the next 12 months. He points out that BMPS has been rehabilitated and requires re-privatization, while UniCredit has a substantial excess of capital. The Italian government’s new industrial agenda further supports the possibility of transformative actions within the banking sector.
UniCredit, in particular, has been delivering impressive results, with substantial quarterly profit increases. The bank’s profitability is reflected in its 54% year-on-year earnings growth, amounting to 8.6 billion euros in the previous year. Share buybacks and dividends have been instrumental in satisfying investors and maintaining market confidence.
On the other hand, BMPS, which was rescued in 2017 for 4 billion euros, is due to be returned to private ownership according to agreements with European regulators and the Italian government. Italy’s Economy Minister Giancarlo Giorgetti has emphasized the commitment to divest government stakes in BMPS, indicating a shift towards privatization.
Nicola De Caro, senior vice president at Morningstar, sees opportunities for consolidation, particularly within domestic markets such as Italy, Spain, and Germany. While recent mergers like Intesa-Ubi, BPER-Carige, and Banco-Bpm have addressed some fragmentation, there is still room for further consolidation, especially at the medium-sized bank level.
De Caro predicts that UniCredit, BMPS, and other medium-sized banks will play crucial roles in shaping the future landscape of the Italian banking sector. Despite the consolidation efforts, he suggests that structural impediments might hinder cross-border mergers within Europe.
UniCredit CEO Andrea Orcel remains cautious about potential deals in Italy, citing current market conditions. He acknowledges the need for strategic acquisitions but highlights the importance of shareholder value and market dynamics. Paola Sabbione from Barclays shares a similar sentiment, emphasizing the necessity for a high bar in Italian banking M&A transactions.
European officials, including French President Emmanuel Macron, have underscored the importance of larger and more profitable banks in Europe. However, skepticism persists regarding mega deals, as seen in Spain’s resistance to BBVA’s bid for Sabadell in May. Despite the push for consolidation, differences in banking markets across countries pose challenges to widespread mergers.
Italy’s banking sector is poised for significant changes, with potential mergers and acquisitions on the horizon. The performance of key players like UniCredit and BMPS, coupled with regulatory commitments, signal a shift towards consolidation. While the need for larger banks in Europe is evident, overcoming barriers to cross-border mergers remains a key challenge for policymakers and industry stakeholders.