Pop Milano sits pretty as Italy cooperative banks brace for M&A

Sun Apr 26, 2015 8:19am EDT
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By Valentina Za and Andrea Mandala

MILAN (Reuters) - At least five investment banks are vying to win a mandate from Banca Popolare di Milano (BPM) PMII.MI and find it a partner as Italian cooperative lenders gear up for a wave of mergers following a landmark reform of the sector.

The Milanese bank, Italy's seventh-largest by branches, has been dubbed by industry watchers the "belle of the ball" among large cooperative lenders that are looking at tie-up options as they are being forced to drop their cooperative status.

A new law forces Italy's 10 largest "popolari" banks to convert into joint-stock companies within 18 months and shed rules that currently grant shareholders one vote each regardless of the size of their stake.

Those rules, together with ownership restrictions, have long been seen as an obstacle to mergers and to attracting new investors, so banks are now bracing for a consolidation frenzy.

Popolare di Vicenza and Veneto Banca have already hired advisers. BPM will send out letters in coming days to invite formal proposals from investment banks, a banking source said.

JP Morgan (JPM.N: Quote), Mediobanca (MDBI.MI: Quote) and Barclays (BARC.L: Quote) are among those hoping to win a mandate, other banking sources said.

Merger speculation has helped BPM shares rise 70 percent so far this year, outperforming a 27 percent rise in Italy's banking sector . Still, with a market value of 4 billion euros, the bank trades at 0.9 times its tangible book value, below a European sector average of nearly 1.2 times.

Popolare di Milano is based in Italy's financial capital, where per capita income is 50 percent above the national average, and nearly 80 percent of its roughly 700 branches are in the rich northwest - where the percentage of new loans turning sour is 3.2 compared with 5.3 in the poorer south.   Continued...

People walk in front of the Banca Popolare di Milano in Milan October 25, 2010.  REUTERS/Paolo Bona