Verona-based bank Banco Popolare has agreed to buy Banca Popolare di Milano Scarl (BPM), in a merger that will create the third-biggest lender in Italy. The new bank will have an approximate market value of €5.7bn ($7.05bn), around €171bn ($211bn) in assets and over 25,000 employees. It is expected that the all-stock deal will be finalised by the end of this year, following a €1bn ($1.24bn) capital injection from investors.
According to the Wall Street Journal’s source, the combined entity will prompt cost savings of €290m ($359m), while also creating additional revenue that is estimated at €75m ($93m) per annum by 2018.
Banco Popolare’s shareholders are set to own 54 percent of the combined company, which will initially have a board of 19 members and will later see a reduction to 15 members after a three-year period.
The merger is strongly supported by the Matteo Renzi-led Italian Government, which is relying on acquisitions such as these to modernise Italy’s financial sector and accelerate the volume of corporate loans given by lenders.
It is also hoped that news of the deal will spur a surge of consolidation in the industry through similar acquisitions among Italy’s top cooperative lenders. Ultimately, through such measures, the banking industry could well give Europe’s third-largest economy a much-needed boost out of its recession.
Aside from the government’s own intentions, the European Central Bank is also applying greater pressure on the industry to consolidate, reconcile its balance sheets and address around €360bn ($445bn) worth of troubled loans.
With pressure from both the government and external entities, a period of development is greatly anticipated from Italy’s banking sector – and given the news of this major merger, perhaps it has indeed begun.