Monte dei Paschi shows challenge of fixing Europe’s weaker banks
The recent wave of M&A has left behind weaker banks such as Banco BPM, Sabadell and, above all, Banca Monte dei Paschi di Siena. Jean Pierre Mustier’s exit from UniCredit shows why.
The wave of bank M&A sweeping Europe has been good for healthier banks to date.
However, it has not fixed the deepest problems in the sector: zombie banks, loaded down with legacy problems, whether operational, legal or most commonly – especially after Covid – in their loan books.
Take a look at the list of takeovers that have been agreed or launched. Then take a look at a list of parallel would-be deals that have been abandoned, or which have been widely rumoured, and have so far come to nothing – making fire sales or state-led rescues likely.
Exhibit one: talks between BBVA and Banco Sabadell broke down barely two weeks after they were announced in mid-November, apparently due to price. Contrast this with what happened a couple of months earlier between CaixaBank and Bankia, who agreed a far less anticipated €4.3 billion deal with surprising alacrity.
And the difference between these two deals or would-be deals? The profitability of Bankia’s network may be dire due to its overreliance on mortgages – something CaixaBank should help to fix – but its operational and credit risks are easier to know than those of Sabadell.