Banks: Mediobanca says an EU ‘Risiko’ is now needed; ‘Unicredit-Santander like JP Morgan’
Experts at Piazzetta Cuccia: ‘To narrow the gap with the US’
(Il Sole 24 Ore Radiocor) - Mediobanca ‘suggests’ that UniCredit should abandon its domestic expansion plans and, having acquired Commerzbank, focus once again on overseas markets – specifically Spain, and therefore on Santander – to create the ‘European JP Morgans’ that are needed at a continental level. This recommendation, perhaps somewhat surprisingly, comes from a comprehensive report by analysts at Mediobanca Research, entitled, not without some emphasis, “Tinder banking: in search of the EU’s future champions”. The conclusion is clear: “Europe needs mega-banks”, based on “scale and business diversification to compensate for the lack of cost-cutting”. Right, but which ones? The analysts hypothesise dozens of combinations, until they find the ideal ones, by measuring the ‘compatibility’ between the 12 major institutions on the Old Continent. It would be a large-scale consolidation process, the fuse for which, according to the experts at Piazzetta Cuccia, could well be lit by the Italian banking shake-up currently underway.
The highest scores of all go to a possible merger between Santander and either BNP or Crédit Agricole, or to the three-way combination of ‘UniCredit, Commerzbank and Santander’. These are the scenarios that receive ‘the highest scores’, highlighting ‘the importance of the scale resulting from the merger, where greater size is a desirable objective’ for closing the gap with the major US banks. Analysts also consider “combinations capable of generating more comprehensive and diversified business models” to be “more desirable”. In summary, the benefits of M&A are greatest when ‘scale and complementarity’ coincide, whilst they are more limited ‘in cases where aggregate profitability is low and business models overlap’. Therefore, it would make sense to “combine solid retail and franchising networks in geographically complementary areas”.
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