Alberto Nagel looks at banking consolidation: “in Europe there are political and technical obstacles that should be removed”
“It is unlikely to happen,” according to Alberto Nagel, CEO of Mediobanca, who sees “technical and political obstacles” on the horizon of a possible banking consolidation in Europe. The same obstacles “that we should focus on and that should be removed,” said in an interview with Bloomberg TV the number one at Mediobanca, the leading investment bank in the rankings for M&A deals followed in Italy and which over the years has been enlisted to follow the main hostile takeover bids between banks at a European level, from Intesa-UBI to Crédit Agricole- Credito Valtellinese to BBVA-Banco Sabadell. Even in a phase of recovery in investment banking, which will allow various sectors to take the road to consolidation, it is in fact difficult for transnational mergers to occur that lead to the creation of large credit operators at a European level, Nagel observed. During the interview with Bloomberg, the CEO of Mediobanca also illustrated the evolution of the Group which has set itself the development of Wealth Management as a priority objective in the 2023-26 Strategic Plan “One Brand One Culture”, leveraging the historic link with Italian companies and the families to which they belong.
Barriers to M&A, from local interests to accounting and capital rules
“We need to focus on the obstacles and remove them,” said Alberto Nagel about banking consolidation, explaining why in his opinion “everyone is talking about it but in reality it is difficult for it to happen”. Despite a recovery in M&A, which in Europe has seen a 45% growth in volumes since the beginning of the year, and despite the desire of several bankers to favor mergers that would allow for increased post-merger profitability, the banker finds a scenario conditioned by obstacles of a political nature. “There are still some banks in Europe that are partially owned by governments,” Nagel highlighted, explaining how this makes “local interests prevail”. This is the reason why politicians say they are generally in favor of mergers between banks, but when, for example, the divestment of a public shareholding is requested, the impression they give is that it is “better to find a national solution rather than a cross-border solution”, said Nagel. Then there are technical and regulatory issues that the CEO of Mediobanca believes should be reconsidered. “In a time of higher interest rates,” said Alberto Nagel, “you have long-dated assets that need to be written down when it comes to merger accounting, while liabilities will not be revalued.” The G-SIB buffer (the banks that are on the list of global systemically important institutions, subject to the most stringent capital requirements, ed.) can also be a barrier to mergers, Nagel said, noting that “there are some large banks in Europe, but which are not really large banks globally, for which the G-SIB buffer is too high,” a factor that should push to “rethink that G-SII buffer also in relation to AT1 (Additional Tier 1, a family of bonds of bank capital that are convertible into shares, ed.).”
Alberto Nagel Led Mediobanca in Major Hostile Takeovers Among European Banks
“By the hand of its CEO, Alberto Nagel,” wrote Expansión, a Spanish financial daily, “Mediobanca has accumulated extensive experience as an advisor in banking operations in Europe.” BBVA’s hostile public exchange offer for Banco Sabadell announced last May, with which the bidding bank is offering a share exchange with a total value of over 12 billion euros, follows other significant operations in the banking sector that have been jointly directed by Mediobanca. One case cited by the international press to describe the impact of a possible merger between BBVA and Banco Sabadell is that of the hostile takeover bid that, which was successful in 2020 with the total acquisition of UBI Banca, made Intesa San Paolo the largest Italian commercial bank. The institute led by Alberto Nagel played a key role in that operation as well as, a few months later, in one of the rare cross-border transactions in the European market, the one that allowed the French group Crédit Agricole, which is among the top ten at European level, to incorporate Credito Valtellinese, again through a hostile takeover bid. In the role of advisor, Mediobanca contributed to banking consolidation, at a national level, also by assisting the Spanish Unicaja in the aggregation with Liberbank (takeover bid concluded in July 2021) and celebrating in Italy the wedding of Banca Carige with BPER Banca, which in September 2022 consolidated with that acquisition the fourth place among Italian commercial banks. The operation monsters BBVA’s proposal to merge with Banco Sabadell is currently being considered by the European Central Bank, despite having met with strong opposition from the Spanish government. After the green light from Frankfurt, it will be up to Banco Sabadell shareholders to decide whether to surrender their shares in exchange for BBVA’s. The majority of the capital’s support would pave the way for a transformative merger for the eurozone banking sector, potentially bringing the Basque group’s assets to over $1 trillion and making it the eurozone’s third-largest bank by market capitalization.
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