Italian banks Banco Popolare SC and Banca Popolare di Milano Scarl (BPM) announced on Wednesday they would merge, in a long-awaited deal that would create the country’s third-largest bank by assets.
The deal creates a lender with more than 25,000 staff and 4 million customers, and could help drive consolidation among Italy’s fragmented banking sector.
The deal has been delayed as the banks struggle to meet higher capital requirements, weighed down by hundreds of billions of euros of bad loans and weak economic growth.
Banco Popolare, which is to own 54 percent of the new company, is seeking to raise 1 billion euros (US$1.1 billion) of capital before the merger is completed by December, Bloomberg News reported.
“We are particularly pleased to have succeeded... given the severe and negative market conditions, in launching an operation as extraordinary and significant as the merger of Banco Popolare and Banca Popolare di Milano,” Banco Popolare president Carlo Fratta Pasini said.
The as-yet-unnamed lender is to have two headquarters — the legal side headed from Milan, Italy and administrative side in Verona, Italy.
With a market capitalization of about 5.5 billion euros, 171 billion euros in assets and 2,500 branches, it is to be Italy’s No. 3 lender behind Intesa Sanpaolo SpA and UniCredit SpA.
The European Central Bank (ECB) has been piling pressure on Italy’s banks to deal with their weak balance sheets and the head of its supervisory arm on Tuesday said the merger must succeed.
“The bank has to be strong at the very beginning, this will be the third Italian bank,” ECB Supervisory Council president Daniele Nouy said.
The merger is “a very important operation, it has to be a success, precisely because it’s maybe the first of a series of other ones,” she told the European parliament’s committee for economic and monetary affairs.
However, she said that similar banking mergers elsewhere had “ended up creating a worse situation or difficulties for the banks coming from the merger.”
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