Mario Draghi Helps Pave Way for Italian Bank Mergers
By Giovanni Legorano and Patricia Kowsmann
When Mario Draghi ran the European Central Bank, he pushed,
unsuccessfully, to get the region's feeble banks to merge and clean
Now as Italy's prime minister, he is trying again, hoping to
spur a consolidation wave among the country's beleaguered lenders.
Italy's banking sector, stuffed with soured loans and weighed down
by high costs, has long loomed as the weakest link among countries
that share the euro currency.
Last week Mr. Draghi's government simplified procedures for
banks to benefit from tax breaks when they merge, effectively
giving them more time to access these benefits.
The move is raising expectations among Italian bank executives
for mergers to come. Also helping: an economy bouncing back from
the pandemic and M&A banking veteran Andrea Orcel taking the
helm last month at UniCredit SpA, the country's second-largest
"There is a very favorable context so I think that in the next
12 months we could see more transactions," said Alberto Nagel,
chief executive of investment bank Mediobanca SpA.
Consolidation is seen as a way for banks to reduce costs and
slash their way to more profits. Compared with the U.S., Europe's
banking scene is highly fragmented, with each nation hosting its
own vast collection of regional banks. And unlike the strong growth
in the U.S., Italy's economy has barely grown for years, creating a
difficult backdrop for banks to operate.
Italy's banks became a flashpoint during the European sovereign
debt crisis earlier last decade. Several required state bailouts.
After the crisis, Italian banks ignored calls by Mr. Draghi and
other regulators to merge. Rome played a role by keeping troubled
banks alive instead of pushing for sales or liquidations, which
could harm depositors or savers who invested in bank bonds.
Share prices of Italian banks have been among the worst
performers globally for years, but have bounced back this year as
the economy has recovered. Investors sense a change in tone when it
comes to the possibility of mergers.
"A once in a lifetime window of opportunity opened up to solve
the problems Italian banks have had for years," said Antonio
Amendola, a portfolio manager at asset manager AcomeA SGR.
UniCredit is likely to emerge as an acquirer. Last year it lost
its spot as the largest bank in the country by assets after rival
Intesa Sanpaolo SpA took over UBI Banca SpA. Mr. Orcel, who
recently became CEO, was previously head of investment banking at
UBS Group AG and made a career forging European bank deals.
A target for UniCredit is Banca Monte dei Paschi di Siena SpA, a
perennial trouble spot for the European banking system, according
to people familiar with the matter.
The Tuscan bank was nationalized in 2017 after years of coming
close to failure, weighed down by bad loans and a legal scandal.
Rome agreed with European authorities to reprivatize the bank by
April of 2022.
UniCredit is also interested in exploring a tie-up with Banco
BPM SpA, Italy's third-largest bank by assets, according to people
familiar with the matter. BPM serves primarily the wealthy Italian
region of Lombardy,
Mr. Orcel could opt to snap up both banks or just BPM, according
At an event last month, BPM's Chief Executive Giuseppe Castagna
signaled it wants to participate in deals, but as an acquirer. "We
need three large national banks that can compete at national and
European level," he said.
Banco BPM declined to comment further. UniCredit and MPS
declined to comment.
Italy is also trying to sell Banca Carige SpA, another troubled
lender that in 2019 was rescued by the country's deposit protection
fund. The fund, which is fed with contributions from banks, is
currently shortlisting potential candidates.
It is unlikely that foreign buyers will play a role in Italian
deals. Cross-border mergers to create real European heavyweights
are harder to carry out due to resistance from national authorities
and because there is no eurozone-wide deposit insurance plan.
Cross-border mergers also provide less cost savings for the
--Ben Dummett contributed to this article.
(END) Dow Jones Newswires
May 24, 2021 06:57 ET (10:57 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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