Banco BPM free to explore M&A opportunities after Cattolica settlement

MILANO: Banco BPM's accord with insurer Cattolica to resolve a dispute over their bancassurance partnership leaves Italy's third-biggest bank free to pursue potential mergers, while allowing Cattolica to press on with capital raising plans, industry analysts said.

Shares in Banco BPM and Cattolica rose on Monday after the two companies settled the row over their joint ventures.

Banco BPM and Cattolica said late on Friday they had signed an agreement over their insurance joint ventures, giving Banco BPM an option for an early exit from Jan. 1, 2023.

Cattolica's shares rose as much as 6% on Monday, while shares in Banco BPM were up 2.9% by 1326 GMT.

Banco BPM had said last year it would exercise a right to buy Cattolica's stakes in their insurance ventures following an investment in Cattolica by bigger rival Generali, a move challenged by Cattolica.

The deal will avoid settling the matter through arbitration, a procedure that risked leaving them mired in uncertainty for an extended period.

Friday's agreement set the terms at which Banco BPM can resolve the JVs with Cattolica before they naturally come to an end.

Banco BPM is looking for a merger partner. Chairman Massimo Tononi told weekly Milano Finanza on Saturday he expected a deal could take place in the next 12 months.

Banco BPM had held talks with BPER Banca, whose top investor is insurer Unipol, which is keen to secure a wider distribution network for its products, sources have told Reuters.

"The agreement improves Banco BPM's position in any M&A deal as it leaves Banco BPM with free hands to negotiate new bancassurance partnerships in any such deal, and in particular in a deal with BPER Banca", Intesa Sanpaolo analysts said.

Broker Equita also said it saw the accord as positive for Banco BPM because it provided "strategic flexibility in terms of M&A and eliminated uncertainty arising from a possible legal battle with Cattolica ... increasing the changes of a deal with BPER"

Cattolica will be free to focus on the second tranche of a proposed 500 million euro capital increase demanded by supervisors, analysts said.

Cattolica was advised by Barclays.