October 2, 2019 / 10:12 AM / 16 days ago

Italian lender UBI urged to look at merger opportunities

TURIN (Reuters) - Italy’s UBI Banca (UBI.MI) should look at possible merger opportunities with other mid-sized banks such as Monte dei Paschi (BMPS.MI), BPER Banca (EMII.MI) and Banco BPM (BAMI.MI), its biggest shareholder said on Wednesday.

FILE PHOTO: UBI Banca Popolare Commercio & Industria logo is seen in Milan, Italy, February 28, 2016. REUTERS/Stefano Rellandini/File Photo

Second-tier Italian banks are expected to embark on a new round of consolidation, seeking to prop up profits with cost cuts as they contend with negative interest rates and stiff competition from fintech rivals.

UBI, Italy’s fifth-largest lender, is widely regarded as key player in the expected consolidation wave.

Monte dei Paschi, BPER and Banco BPM are all potential targets that a bank like UBI should examine, “even just to rule them out”, Giandomenico Genta, head of the charitable banking foundation that holds about 6% of UBI, told reporters on the sidelines of a banking conference.

Gento, chairman of Fondazione Cassa di Risparmio di Cuneo (CRC), added that UBI has no concrete merger plans as yet.

Banco BPM Chief Executive Giuseppe Castagna on Monday said that a tie-up with UBI, which has a strong presence in Lombardy, was a deal that “would make sense”, given his bank’s choice of possible merger partners would be based in northern Italy.

Castagna’s comments lifted shares in UBI and Banco BPM, with traders saying investors were betting on a deal next year.

Fabrizio Bernardi, an analyst at brokerage Fidentiis in Milan, said that such a deal would allow “massive cost cutting”, given the geographical positioning of the two banks.

The CRC banking foundation is the leading shareholder in a group of UBI investors which recently struck a pact to consult over any major decision concerning the bank.

The group, which includes some local wealthy families in UBI’s Lombardy region for an aggregate stake of 16.7%, wants to have a say in any potential merger.

Genta said he would be happy to have new shareholders join the pact, provided the aggregate stake remained below 25% of UBI’s capital to avoid triggering a mandatory takeover bid.

Reporting by Elvira Pollina; Writing by Andrea Mandala; Editing by David Goodman

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