Italian cooperative bank UBI is talking to domestic rival Banco Popolare among others about a possible tie-up after a government reform of the sector that is expected to spur a wave of mergers between the country's lenders. UBI Chief Executive Victor Massiah warned however that there was no "obvious" deal on the table, and said his bank could decide to carry on its own.
"It's no secret that we are talking to a number of banks, including Banco Popolare, and it's no secret that Banco Popolare is also talking to a number of banks," Massiah told reporters at a shareholder meeting that approved the bank's conversion into a joint-stock company as required by the reform. "But these are all complex operations, there is nothing obvious. It's premature (to talk about it)." UBI, Italy's fifth biggest lender, was the first of the 10 cooperative banks affected by the new legislation to approve the changes, a pillar of Prime Minister Matteo Renzi's agenda to shake the euro zone's third-biggest economy out of the doldrums, modernise its crowded banking system and revive lending.
The reform scraps voting rules giving shareholders one vote each regardless of the size of their stake. Critics say those rules have long distorted governance and hampered mergers by allowing minority shareholders to block unwanted change. A merged UBI and Banco Popolare would leapfrog Monte dei Paschi di Siena as Italy's third-largest bank by assets, forming a new powerhouse with some 250 billion euros ($280 billion) in combined assets and strongholds in the rich northern Lombardy and Veneto regions.
UBI has also been tipped as a possible domestic white knight for troubled Monte dei Paschi di Siena, but Massiah appeared to pour cold water on such a deal. "If Monte dei Paschi comes knocking on my door I have no reason not to talk to them, but whether the conditions for an operation are there is another matter," he said.
The government reform faces resistance from some shareholders and local vested interests that have long held sway over the country's cooperative banks, known as "popolari". Unions are also wary, fearing massive job cuts. "We won't tolerate mergers that will entail a bloodbath in terms of layoffs," said Lando Sileoni, a UBI employee and the secretary general at FABI, the biggest banking union. "We also need to be careful not to fall prey to foreign groups." To blunt the impact of the changes, UBI has introduced a limit on voting rights at 5 percent until March 2017.
Banks have until the end of 2016 to adopt the new rules, but the reform faces a string of legal challenges that could delay its implementation and the merger deals expected to follow it. Bankers say that aside from the lawsuits, merger talks between the main popolari banks have also failed to bear fruit so far because of disagreements on where headquarters should be located and who should be in charge of the combined groups. Most deals are not expected to see the light until next year. Several cooperative lenders targeted by the reform have scheduled shareholder meetings to vote on the new rules in the second half of next year, in a sign they are in no rush to embrace the changes.