• Banco Popolare and Popolare Milan would rank No. 3 if merged
  • Monte Paschi CEO Viola says no merger options on table now

Banco Popolare SC’s chief executive officer said he’s confident the Italian cooperative lender can reach a merger agreement with competitor Banca Popolare di Milano Scarl in a deal that would create Italy’s third-largest lender and probably trigger a round of combinations in the industry.

Pier Francesco Saviotti, CEO of Banco Popolare, told reporters on Saturday at a financial conference in Turin that a deal probably can be made soon, though there’s no certainty of an agreement. His counterpart at Popolare Milano, Giuseppe Castagna, said “February should be the month for a deal,” though he stressed he’s still also open to talks with rival Unione di Banche Italiane SpA in addition to Banco Popolare.

Pier Francesco Saviotti
Pier Francesco Saviotti
Source: Banco Popolare

“There are still two alternatives for M&A,” Castagna told reporters.

A Banco Popolare combination with Popolare di Milano would create a lender with about 245 billion euros ($265 billion) in assets. Only UniCredit SpA and Intesa Sanpaolo SpA are larger. The Banco Popolare-Popolare Milano merger would be the first deal since the approval a year ago of a law abolishing restrictions on ownership and voting rights for cooperative banks -- known as “popolari” -- two longstanding obstacles to consolidation.

The government is counting on acquisitions to modernize the industry and spur lending, helping the euro-area’s third-largest economy recover from a three-year recession. Collectively popolari -- and there are dozens of smaller ones -- represent about 25 percent of Italian deposits and loans, according to Assopopolari, their industry group.

Banca Monte dei Paschi di Siena SpA, the world’s oldest bank, has been seeking a buyer to shore up its finances. It’s shares have dropped 46 percent this year on concern over the bank’s bad debt load, the highest relative to its assets among Italy’s biggest lenders. So far, it’s been unable to find a partner.

“There are no merger options on the table now,” Monte Paschi CEO Fabrizio Viola told reporters in Turin today.

For his part, UBI CEO Victor Massiah said there’s no pressure from the Italian government for a deal with Monte Paschi. UBI is still interested in a tie-up with Popolare Milano if the latter is willing, he said.

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