Italy studies Banco BPM option in search for MPS buyer

Milan: Italy has been examining a potential tie-up between Monte dei Paschi di Siena (BMPS.MI) and Banco BPM (BAMI.MI) in the past few weeks in its search for a buyer for the state-owned Tuscan bank, three people with knowledge of the matter said.

The latest discussions within the Treasury signal that new Prime Minister Giorgia Meloni’s government is moving to tackle Italy’s biggest banking headache. Monte dei Paschi (MPS), which raised capital last year, needs to merge with a stronger rival to cement its turnaround.

Italy’s government has long seen UniCredit (CRDI.MI) and Banco BPM as the best options for a tie-up that would allow the state to cut the 64% stake it acquired in a 2017 bailout of MPS.

With 858 billion euros in assets, against Banco BPM’s 190 billion, UniCredit had been singled out by Rome in 2021 as the preferred buyer for MPS, which still has 120 billion euros after a 45% reduction over the past decade.

But the collapse of merger talks in October 2021 over UniCredit CEO Andrea Orcel’s request for a 6.3 billion euro capital injection for MPS has made the government diffident towards the former investment banker, despite UniCredit’s efforts to mend relations.

In December, Meloni said the government would work to sell MPS with a view to creating several large banking groups in Italy.

An official in Meloni’s cabinet office said that Orcel’s U-turn had made the government wary of pursuing further talks. UniCredit declined to comment.