August 2, 2019 / 3:26 PM / 3 months ago

Banca Ifis in talks to merge bad debt business with Credito Fondiario

MILAN (Reuters) - Italy’s Banca IFIS (IF.MI) is in exclusive talks to sell some of its operations to rival Credito Fondiario, IFIS said on Friday, in a deal that would create a leading player in the soured loans market.

Under the deal, Venice-based IFIS would fold its bad loan collection and purchasing businesses into a new entity which would then become part of Credito Fondiario, with IFIS keeping a minority stake.

Italy’s loan recovery industry has grown in recent years as regulators pushed banks to shed 170 billion euros ($189 billion) in loans that turned sour during the country’s deep recession.

Both IFIS and Credito Fondiario were early movers in spotting the opportunity provided by Italy’s booming market for bad bank debts. They have grown their businesses to become both buyers and managers of other banks’ loan portfolios.

With disposals slowing, the sector is heading towards consolidation and players are rushing to build up scale to cut costs and reduce competition.

“A deal would allow us to become more efficient in our market ... and better compete in Italy or also Europe,” IFIS Chief Executive Luciano Colombini told an analyst call.

Majority-owned by U.S. fund Elliott, Credito Fondiario recently hired Goldman Sachs (GS.N) and Deutsche Bank (DBKGn.DE) to assess strategic options, after saying in the past it aimed for a stock market listing.

A source familiar with the matter has told Reuters that a fragmented sector meant a merger deal was “the most sensible” first step ahead of a possible bourse listing.

“The non-performing loan market is changing ... we want to keep a presence in it, and be part of a larger player,” IFIS head of investor relations Martino Da Rio told the call.

IFIS would retain ownership of its soured loan portfolio which amounts to 16.4 billion euros. No financial details of the possible deal with Credito Fondiario were given.

The two parties have 60 days to reach an accord, IFIS said.

Additional reporting by Pamela Barbaglia in London; Editing by Silvia Aloisi and David Holmes

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