Intesa Sanpaolo, Banco BPM vie for Monte dei Paschi in Italian banking battle

Intesa Sanpaolo launched a takeover offer for Banca Monte dei Paschi di Siena on Monday, kicking off a bidding war with Banco BPM for the troubled Italian lender. Monte dei Paschi shares surged 12% on the news, while Intesa’s fell 3.7% and BPM rose 1%, as investors weighed which deal was more likely to succeed.

Keefe, Bruyette & Woods analysts said in a research note that Intesa’s proposal is more likely to be completed than BPM’s merger-of-equals, though BPM could afford to pay more than €11 per share for Monte dei Paschi and still make the deal work. “We think a deal between [BPM] and [Monte dei Paschi] had been seen as more likely, of late, but [Intesa] gatecrashing that will reduce the chances of that transaction being consummated,” the KBW analysts said.

Barclays analysts described Intesa’s bid as a surprise, noting that BPM’s move had been widely expected while UniCredit remained focused on its own pursuit of Commerzbank. The reaction from Monte dei Paschi’s core shareholders, as well as from its executives and board, will be decisive, according to Barclays analysts Paola Sabbione and Dibin Meledath Koruthu. Monte dei Paschi CEO Luigi Lovaglio has previously signaled openness to a deal with BPM, the analysts said, but might be reluctant to agree to an Intesa deal that would write off the merger with Mediobanca he pursued.

RBC Capital Markets analyst Pablo de la Torre Cuevas said Intesa’s offer makes long-term strategic sense by strengthening its position in the domestic wealth-management, corporate and investment banking, and consumer-finance businesses. However, the fate of the deal depends on BPM’s competing proposal and the preferences of Italian political leaders, who have previously signaled they would prefer a domestic consolidation path excluding Intesa, the analyst said.

The rival bids have implications beyond Monte dei Paschi. Unipol, the largest shareholder of BPER Banca, reached an agreement with Intesa to buy 635 Monte dei Paschi branches for between €3 billion and €3.5 billion to avoid antitrust issues, Barclays analysts said. Italian press reports indicate Unipol would transfer the branches to BPER, a move Barclays said would be positive for BPER. BPER shares rose 4.2% on Monday.

Monte dei Paschi holds a 13% stake in insurer Assicurazioni Generali, acquired through its takeover of Mediobanca last year. KBW analyst William Hawkins said Generali’s business is of interest to all major parties in the potential acquisition. He noted that shares of Generali, which rose 1.5% on Monday, have outperformed European peers by 15% this year, suggesting room to fall if the deal falls apart.

UniCredit, the biggest shareholder in Commerzbank and currently in the midst of a tender offer for the German bank, may also be drawn into the bidding. KBW analysts said Commerzbank shares could face selling pressure if UniCredit decides to enter the race for Monte dei Paschi, since investors might see UniCredit as less likely to raise its Commerzbank offer if it pursues a second deal. Commerzbank shares fell 1.2% on Monday.

Beyond the Italian consolidation, analysts flagged other regulatory and policy developments affecting European banks. Morgan Stanley analysts said a July report from the U.K.’s Financial Policy Committee is likely to lower the leverage ratio to align with EU standards, freeing roughly £250 billion in leverage capacity for U.K. banks to lend and invest. Between 25% and 50% of the released capacity will likely flow into U.K. government bonds, the analysts said, calling the change “incrementally positive for profitability.”

The European Central Bank is expected to deliver a 25-basis-point rate hike at its rate-setting meeting on Thursday, its first increase since 2023, according to market pricing. Commerzbank rates strategist Rainer Guntermann said the bar for a hike is so low that there is “barely any stumbling risk.” The focus will be on how far the ECB opens the door to further action and whether a back-to-back hike follows in July. “Every man and his dog expect the ECB to act,” Guntermann said. Commerzbank sees a follow-up hike in July as premature but expects another in September.

In Asia, HSBC analysts said central banks face growing pressure to tighten monetary policy as a strengthening U.S. dollar puts exchange-rate pressure on regional currencies. While inflation remains largely manageable across much of Asia, the longer policy rates are left unchanged, the more they may need to tighten later, HSBC said in a research note. The trade-weighted U.S. Dollar Index stood at 120.08 on Monday, according to FRED data.