Financial consolidation stalls

GENEVA – Europe’s goal of forging a single financial market risks a lengthy detour, as Italian business interests prepare to celebrate victory over foreign takeover bids, investors said on Wednesday. Time has almost run out for top Dutch bank ABN AMRO and Spain’s No. 2 bank BBVA, which both face intense opposition from Italian rivals in their efforts to buy local retail banks. ABN AMRO and BBVA dared to launch their bids in the face of perceived opposition from the Bank of Italy, the regulator who wishes to promote domestic consolidation and who wields the final say in any acquisition. The two banks are expected to acknowledge today that takeover difficulties have proven insurmountable after some senior bankers charged that regulatory authorities tilted the playing field against them. While the Bank of Italy has never boasted a national bias, local business interests, described by some as «patriotic mercantilists,» are reaching for the prosecco. In both cases – ABN’s attempt to buy Antonveneta and BBVA’s to buy BNL – they were able to rally local investors to the cause of keeping Italian banks in Italian hands. For Europe, the result may be lopsided consolidation, as economically troubled Italy, with perhaps Europe’s most fragmented banking market, splits from the rest of the EU while others forge ahead. «In the field of banking, national interests are standing before the interests of an efficient banking sector,» said portfolio manager Peter Braendle at fund manager Swisscanto, a shareholder in ABN AMRO that has around 50 billion francs ($38.6 billion) in assets. «This confirms what’s been the case in Italy for some time,» he said. Predators may now turn to Germany, another fragmented market, especially after Italy’s UniCredito last month unveiled a 20-billion-euro friendly bid for Germany’s second-largest bank, HVB Group. The UniCredito coup demonstrates that consolidation in Europe, instead of coming as long predicted – a rapid and aggressive rush for the best assets – will advance and stumble, fall back and then perhaps advance again. And Italy may not be the only country that puts up its defenses. Germany is suspected of drawing the line at flagship Deutsche Bank, and France has been long reputed to promote national champions over foreign banks. It’s also worth recalling that less than a year ago, Belgian provincial interests – not Italian – derailed efforts by Italian bank Sanpaolo IMI to take over Franco-Belgian group Dexia. Few tears But if ABN AMRO and BBVA admit defeat, few investors are likely to shed tears – even if it frustrates the EU’s efforts to promote a single financial market. Neither deal is seen as strategically crucial, and Italy is fraught with difficulties. «I would rather be a seller than a buyer of the (Italian) banks at these prices, because at the end of the day you have to deal with the macroeconomic environment, which in Italy is ugly at the moment,» said analyst Simon Maughan at Dresdner Kleinwort Wasserstein. ABN AMRO shareholders have seen their investment rise around 12 percent since May as difficulties have mounted. «The share price at ABN AMRO has recovered, as it has become less likely that they will get into Italy,» said Braendle. «I think, as an investor in ABN AMRO, that it’s not such a good idea to get into Italy at this level.» Shareholders in some Italian banks as well have seen their investments rise in value, as speculation increases that domestic consolidation in Italy could take off now that the foreigners have been shown the exit. Shares in Banca Monte dei Paschi di Siena have taken wing in the past two days, rising around 9 percent as speculation increases that it might become a party to a three-way merger between BNL and insurer Unipol, bidding against BBVA for BNL. «The issue is that (Bank of Italy chief) Antonio Fazio seems to be getting his way, carte blanche. The market is saying: ‘Let’s speculate on consolidation. Let’s not worry about whether it’s good, bad or indifferent for the participant,’» Maughan said.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.