European policymakers have long advocated for larger and more robust banks across the continent, and Italy’s banking sector may soon deliver on this vision through a significant wave of mergers and acquisitions (M&A), according to analysts. Following the sovereign debt crisis and the government’s rescue of Banca Monte dei Paschi (BMPS) from collapse, Italy’s banks are now being scrutinized for potential consolidation.
Antonio Reale, Co-Head of European Banks at Bank of America, expressed confidence that significant developments could occur within the next 12 months. He pointed to BMPS, which has been rehabilitated and is set for re-privatization, and highlighted UniCredit’s strong capital position and the Italian government’s new industrial agenda as key drivers.
UniCredit, in particular, has consistently exceeded market expectations, reporting an 8.6 billion euro profit last year, a 54% increase year-on-year, and rewarding investors with share buybacks and dividends. Meanwhile, BMPS, saved in 2017, must eventually return to private ownership under an agreement with European regulators and the Italian government. Italy’s Economy Minister Giancarlo Giorgetti reaffirmed this commitment in March.
Analysts see significant consolidation opportunities within Italy, Spain, and Germany. Nicola De Caro, Senior Vice President at Morningstar, noted that domestic mergers are more likely than cross-border deals due to structural challenges. Despite recent consolidations in Italy, including Intesa-Ubi, BPER-Carige, and Banco-BPM, the banking sector remains fragmented, particularly at the medium-sized level.
While UniCredit CEO Andrea Orcel indicated that current market conditions are not conducive to acquisitions, he remains open to opportunities if circumstances change. However, Paola Sabbione, an analyst at Barclays, suggests that any potential M&A in Italy’s banking sector will face a high bar for success. European officials, including French President Emmanuel Macron, have emphasized the need for stronger banks, though skepticism about large-scale mergers remains.
