There is plenty of activity on the European banking scene at the moment. Take the game of poker around Commerzbank, for instance: the German government wants out, the Italian big bank Unicredit in. On the subject of Italy, a series of consolidations is already in full swing in the southern European country. Local colossus Unicredit, for example, is offering EURbn 10 for the smaller Banco BPM and has also just bought more than 4% of the shares in the insurer Generali. In addition, the partly state-owned Monte dei Paschi di Siena (MPS) is trying to acquire Mediobanca, Italy’s largest investment bank, for EURbn 13.3. Meanwhile, the Spanish BBVA is forking out EURbn 12 for Sabadell. The French financial institutions are also getting involved: BNP Paribas is driving consolidation in the German private banking sector with the acquisition of HSBC’s wealth management division. The deal is set to complete in the second half of the year, with market observers anticipating a transaction value of between EURmn 300 and 600.
Back to Commerzbank, though, where the future ownership situation has not yet been fully clarified. At the start of September 2024 the Italians had seized the opportunity of the German government’s partial exit to make significant inroads. Shortly before the end of the year, Unicredit revealed that it controlled some 28% of Commerzbank shares. The prospect of a bid did not go down well with Commerzbank at the time. Nevertheless, a deal has not been ruled out entirely. A few days ago, the Frankfurt bank announced that it was talking to its Milan counterparts about a possible takeover on the basis of a written proposal. “We have consistently signalled our willingness to engage in discussions and would review a proposal from UniCredit in the interest of all stakeholders,” Commerzbank stated. That means the ball is now in the Italians’ court, so it will be interesting to see what move Unicredit makes next.
Mergers such as those that Unicredit and Commerzbank may be about to realise are being made possible in part because governments are gradually divesting themselves of the shares of those banks which were nationalised during the global financial crisis. According to Scope Ratings, European governments could unleash a wave of mergers and acquisitions. The experts predict that many sale processes will have completed by the end of 2025 should market conditions remain favourable. The provider of credit ratings believes it is possible that a potential merger of Unicredit and Commerzbank would serve as a blueprint for major French banks looking to expand in Italy and Belgium. There is plenty of movement in the Netherlands, too, whose government reduced its stake in ABN AMRO from 49.5% to 40.5% last autumn. At around the same time, the parliament in Athens announced the sale of a 10% holding in Greece's national bank. That the M&A market is already livening up can be seen by the volume of transactions. The EURbn 20 figure for Europe last year compares with only around half as much in the years before (see graph).
Banks are not just seeing an upturn in M&A activities, though: demand for credit is also picking up again, in some cases significantly so. Last September, for instance, the amount borrowed by companies in the eurozone reached EURtn 5.16, the highest figure for two years. The experts at EY anticipate that the growth in lending will continue in 2025 and 2026. They expect an increase of 3% this year and as much as 4% in 2026. That is good news for the financial institutions, because swelling loan volumes and stable margins mean rising interest income. According to estimates, this makes up some 60% of income in the banking sector.
Aggregate transaction value of banking mergers, USD million
Source: Scope Ratings, as at: October 2024
