Intesa Sanpaolo, Italy’s second largest bank behind UniCredit, has made a €4.9 billion ($5.3bn) bid for its local rival UBI Banca in what can only be interpreted as the start of its Italian bank consolidation play in an otherwise fragmented banking landscape.
UBI is Italy’s fifth largest bank and last registered its total assets in 2018 as $125.3 billion. Intesa says it will offer 17 new shares for every 10 UBI shares tendered.
If Italy’s largest retail lender succeeds in its bid, it says it will create the seventh-largest bank in the eurozone focused on wealth management and insurance with $1.2 trillion in assets.
“The banking sector is heading for consolidation in the coming years […] it is in Intesa’s interest to reach a size that will allow it to compete […] in Europe,” Intesa says in a statement.
The lender anticipates an estimated combined profit of more than $6.5 billion in 2022. Acquiring UBI would also give Intesa three million retail, small business and private-banking clients.
“Intesa considers UBI amongst the best Italian banks . . . [it] has local entrenchment in the most dynamic regions of the country, enjoys outstanding results that have been achieved thanks to the excellent job of both its CEO and its management team, and has a sound business plan,” says Intesa, reasoning its position in wealthier northern Italy and its similar business model to UBI are big factors for the bid.
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Italy’s economy minister Roberto Gualtieri told a parliamentary hearing last October that Italian banks should be seeking mergers to cut costs, boost profits and reduce excessive competition. The Bank of Italy’s director general Alessandra Perrazzelli also chimed in, furthering that a new round of consolidation was key to improving efficiency in the sector.
The consolidation between Intesa and UBI, which has itself been in past talks with Monte dei Paschi and Banca Popolare regarding takeovers, will give both firms the scale to compete internationally as well as domestically.
“Size and the ability to compete both domestically and internationally are key … to adequately reward capital,” Intesa says in its statement. Last October, UniCredit revealed plans to make itself “less Italian” by shifting some of its biggest assets to Germany in a bid to boost its share price value.
To quell potential competition concerns in the latest takeover talks, Intesa has signed a binding contract to sell 400-500 branches of the combined entity to BPER Banca – Italy’s sixth largest bank – and, possibly, some of UBI’s insurance assets to UnipolSai.
Its next step will be to get permission from the European Central Bank for a green light on the deal, which will involve negotiation over the 5,000 job cuts planned as part of the deal.