BMPS and Mediobanca: The Italian Banking Consolidation Saga Continues

Italy's banking system remains the epicentre of a large wave of consolidation. In Morningstar DBRS' view, UniCredit's actions in Germany and Italy, as well as the reprivatization of Banca Monte dei Paschi di Siena (BMPS), have been the main triggers of this consolidation round.

On Friday, 24 January, BMPS (rated BB (high), Positive trend) made a public exchange offer to buy 100% of the shares in Mediobanca. This is the latest of several announcements involving Italian financial institutions in recent months.

In the asset management sector, a few days ago Assicurazioni Generali S.p.A. (Generali) and the French banking group BPCE announced the signing of a nonbinding Memorandum of Understanding to create a joint venture between their asset management operations. In the banking sector, after taking a stake in Commerzbank, UniCredit also launched a public exchange offer for Banco BPM (BBB, Positive trend). Before that, Banco BPM had made an offer to buy the Italian asset manager Anima, and subsequently bought a 5% stake in BMPS.

In this context, the Del Vecchio and Caltagirone families have increased their stakes in BMPS. Both families are also key shareholders in Mediobanca and Generali.

The potential combination of BMPS (EUR 129 billion in total assets as of June 2024) and Mediobanca (EUR 99 billion as of June 2024) would create the third-largest banking group in Italy. In terms of franchise, this would result in the combination of BMPS' large retail and commercial banking network, and Mediobanca's strong franchise in corporate and investment banking and consumer finance. With a 13.1% stake, Mediobanca is also the main shareholder of Generali. BMPS would expect the BMPS-Mediobanca deal to generate approximately EUR 700 million in pre-tax synergies per annum. The usage of deferred tax assets from BMPS would also support the transaction.

Regarding the deal's structure, BMPS would offer 23 newly issued ordinary shares for every 10 Mediobanca shares tendered. As next steps, BMPS' Extraordinary General Meeting is called for April 17 to approve the share capital increase reserved to the offer. The deal, which would be subject to regulatory approvals, is targeted for completion in Q3 2025.

Morningstar DBRS will continue to monitor the potential BMPS-Mediobanca transaction. While taking into account the strategic rationale for this deal, and the significant progress made by BMPS in strengthening its balance sheet, Morningstar DBRS will also consider the execution risks of such a transaction. BMPS has returned to a normalised performance after a long period of restructuring following the State's precautionary recapitalization in 2017.

Morningstar DBRS will also assess the implications across the financial sector. In Morningstar DBRS' view, the interconnections between the various deals, as well as the hostile nature in some cases, make the current consolidation phase in Italy rather complex, and its outcome remains uncertain.

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