BMPS

On Friday, Banco BPM offered a friendly merger with BMPS.  This merger would create the second largest bank in Italy with a mkt cap north of EUR50bn. Geographic complementarity is strong and a merger would generate EUR1.1bn in synergies (650m in costs and 450m in revenues). The offer is deemed friendly and governance will be shared. Credit Agricole has a 22.9% share in Banco BPM. 

On Sunday evening, rumors mentioned potential bid by Intesa San Paolo and BPER banca. 

And this morning, Intesa San Paolo launched a formal EUR30.6bn offer on BMPS with 16 new shares for 10 MPS shares and EUR1 in cash per BMPS share. Deal is expected to generate EUR1.5bn in cost synergies. 

BMPS is the new jewel in the Italian banking crown. After its acquisition of Mediobanca in 2025, BMPS became Italy's third-largest bank. For any Italian bank, a merger with BMPS would create a third sizeable player in Italian banking alongside UniCredit and Intesa Sanpaolo, a goal successive Italian governments have pursued for years. Plus, the 13.2% stake in Generali is also a key asset for anyone in the country.

However,  the timing is tricky: it is important to complete the merger with Mediobanca before any new merger can happen.  Also,  Caltagirone, a significant MPS investor, has publicly opposed a Banco BPM takeover, warning MPS risks being "absorbed". 

BMPS is up 5% on Tradegate.  A merger with BPM is the one that makes the most sense, as we had highlighted that previously. The bid by Intesa is much more surprising in our view. First, Intesa never showed any interest for BMPS. But more importantly, the size of Intesa in Italy means such a merger would likely face very significant antitrust scrutiny.  It is possible that bid is just a way to block the merger proposal by Banco BPM or at least to make it instantly more costly, hence limiting the appetite of Credit Agricole on Italian assets. It is also possible the deal will make the squeeze-out of Mediobanca minority shareholders more difficult. 

There is also a possibility that Intesa San Paolo could seek to buy out BMPS and dismantle it: for example Intesa could keep the Mediobanca wealth management and the stake in Generali (very attractive assets in our opinion) and sell MPS retail banking network to BPER for example. 

In any case, we reiterate our positive stance on BMPS. While we retain a positive stance on Intesa on its fundamentals (Buy with a 20% upside), we expect the stock will trade lower on the prospect of that deal, even though we don't believe it is likely to succeed at this stage.  

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