Banco Popolare, BPM become Italy’s number three bank

Italian banks Banco Popolare and Banca Popolare di Milano announced on Wednesday they would merge, in a long-awaited deal that will create the country's third-largest bank by assets.

Banco Popolare, BPM become Italy's number three bank
BPM's tie-up with Banco Popolare will create Italy's third-largest bank. Photo: Giuseppe Cacace/AFP

The deal will create a lender with more than 25,000 staff and four million customers, and could help drive consolidation among Italy's fragmented banking sector.

The deal has been delayed as the banks struggle to meet higher capital requirements, weighed down by hundreds of billions of euros of bad loans and weak economic growth.

Banco Popolare, which will own 54 percent of the new company, is seeking to raise €1 billion ($1.1 billion) of capital before the merger is completed by December, Bloomberg News reported.

“We are particularly pleased to have succeeded… given the severe and negative market conditions, in launching an operation as extraordinary and significant as the merger of Banco Popolare and Banca Popolare di Milano,” said Banco Popolare president Carlo Fratta Pasini.

The as-yet-unnamed lender will have two headquarters – the legal side headed from Milan and administrative side in Verona.

With a market capitalisation of around €5.5 billion, €171 billion in assets and 2,500 branches, it will be Italy's number three lender behind Intesa Sanpaolo and UniCredit.

The European Central Bank has been piling pressure on Italy's banks to deal with their weak balance sheets, and the head of its supervisory arm on Tuesday said the merger must succeed.

“The bank has to be strong at the very beginning, this will be the third Italian bank, said Daniele Nouy, president of the ECB's Supervisory Council.

The merger is “a very important operation, it has to be a success, precisely because it's maybe the first of a series of other ones,” she told the European Parliament's committee for economic and monetary affairs.

However, she warned that similar banking mergers elsewhere had “ended up creating a worse situation or difficulties for the banks coming from the merger”.

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Renault shares plunge as Fiat merger talks fail

Renault shares plunged on Thursday after Italian-American carmaker Fiat Chrysler said it had withdrawn a proposal for a merger, saying it would be unable to reach an agreement with the French government.

Renault shares plunge as Fiat merger talks fail
A merger between Fiat Chrysler and Renault would have created the world's biggest carmaker. Photo: Marco Bertorello/AFP

Fiat Chrysler (FCA) “remains firmly convinced” of the interest of its offer but “political conditions do not currently exist in France to carry out such an arrangement”, it said in a statement.

French automaker Renault announced earlier that its board of directors had not reached a decision following a crunch meeting held at the request of the French state, the biggest shareholder in Renault with a 15 percent stake.

Fiat Chrysler proposed a “merger of equals” with Renault last week which was welcomed by financial markets and had been given a conditional green light by the French government, although it warned against “any haste” regarding the proposed 50/50 merger.

READ ALSO: Fiat Chrysler proposes merger with Renault

Photo: Loic Venance, Marco Bertorllo/AFP

French Finance Minister Bruno Le Maire had said a merger, which would have brought together the flagship brands as well as Alfa Romeo, Jeep, Maserati, Dacia and Lada, would be “a real opportunity for the French auto industry”. However, he had set various conditions, including that no plants be closed as part of the tie-up and that the Renault-Nissan alliance continues. 

A source close to Renault said Le Maire had asked for a board meeting next Tuesday after he returns from a trip to Japan where he will discuss the proposal with his Japanese counterpart.

At Wednesday evening's board of directors vote at Renault's headquarters near Paris, all the directors were for the merger, apart from a representative of employees affiliated with the powerful CGT union and two representatives of Nissan — a long-time Renault partner — who abstained, the source added.

The two directors appointed by Nissan, however, asked “to write in the minutes that they would say yes with a little more time”.

Fiat Chrysler said: “FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties.

“However, it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”

Renault holds a 43-percent stake in Nissan, whose stocks tumbled 2.64 percent to 742.7 yen on Thursday after the withdrawal was announced. Relations in the partnership have been under strain since the arrest last November of former boss Carlos Ghosn, who is awaiting trial in Japan over charges of under-reporting his salary for years while at Nissan and using company funds for personal expenses.

The merger would have created a group worth more than €30 billion, producing 8.7 million vehicles per year. The combined mega-group — including Nissan and Mitsubishi — would be by far the world's biggest, selling some 15 million vehicles, surpassing Volkswagen and Toyota, which sell around 10.6 million each.

Foreign takeovers of major French firms are highly controversial and successive governments have sought to defend domestic industrial groups which are seen as important for their technology or jobs.