Italy: Merger, mystery, intrigue ...

On 24 September, Deutsche Bank announced it it had bought a stake of 4.5% in Banca Commerciale Italiana (BCI) for L700billion ($420 million).

The drama intensified on September 29 when Luigi Fausti, BCI's chairman was forced out at a board meeting. The chairman fell out with some of the bank's largest shareholders ­ notably Italy's traditional banking power broker Mediobanca ­ over the choice of merger partner for BCI. Fausti favoured a merger with the new Istituto San Paolo-IMI banking group. But Mediobanca has long sought to merge BCI with Banca di Roma.

Italian banks need to grow if they want to be competitive under the euro."I can see three stages of this process," says Daniela Miccolis, analyst at brokerage firm Caboto Sim, "that will lead to not more than five big groups in the next few years. The first stage, which started at the end of 1996, will...