30 October 2007

Moody's predicts cross-border banking consolidation

The incorporation of Capitalia into UniCredito was probably the last chance for a major inter-Italian consolidation in the banking sector but mergers are likely to continue cross-border, analyst group Moody's has stated.

In a research update on Italy's second-largest banking group, Moody's noted further cross-border consolidation was an issue "unlikely to disappear" and "it may be difficult for UniCredito not to become involved at some point".

"Banking sector consolidation is likely to remain an important issue for the UniCredito group, both domestically, and, perhaps more significantly, cross-border," the analysts noted.

"At the top end, the chances for consolidation are pretty much used up with Intesa SanPaolo and UniCredito holding around 20% and 15% market share respectively," while the next largest banks only have around 5% market share, Henry MacNevin, general manager at Moody's in Italy explained to IPE.

He added there was a "very long tale of around 800 much smaller, regional banks" where the scale for consolidation lies both in larger banks acquiring smaller ones and smaller ones merging with other small banks.

However, those are unlikely to be potential targets or foreign banking groups, as they would not strengthen their positions throughout Italy. The last banks to successfully buy into the larger Italian market were BNP Paribas, acquiring Banca Nazionale del Lavoro (BNL), ABN Amro, buying Antonveneta, and Credit Agricole Asset Management (CAAM) purchasing several subsidiaries of Intesa.

While UniCredito and Intesa SanPaolo are both busy integrating their newly-acquired businesses, MacNevin is convinced one or both will in the future be again involved in cross-border merger talks. [see earlier IPE article: Pioneer soaks up Capitalia]

Before the takeover of Capitalia, UniCredito was in merger talks with French banking group Société Générale.

"That did not work out but the possibility of something like that coming up again in the future exists not for Italy but for any European country," said MacNevin.

"I think the events around ABN Amro has perhaps changed the outlook for European banking sector a bit. Gradually, you can see more cross border deals being done even at top level," he added.

© Graham Bishop