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Illustration: Pete Ellis |
Could Santander buy Commerzbank? Could ING or Intesa Sanpaolo buy some of the Italian, Portuguese, and Spanish banks? A look at data on European banks’ relative valuations suggests similar deals could be possible, as banks try to add value by taking over weaker rivals and, perhaps, as a single regulator makes it easier to build pan-eurozone banking operations.
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The price-to-book-value ratio is crucial to bank M&A discussions, as it helps determine the price at which banks can bid. Portugal’s BPI, for example, rejected a takeover by Spain’s CaixaBank earlier this year. But it would have been difficult for CaixaBank to raise equity to make a more attractive offer, analysts argue, given its below-book valuation – around 0.94x, according to Berenberg.
“All things being equal, a bank with a low multiple to book value is generally less likely to do M&A,” says Graham Gilles, chairman of financial institutions group for EMEA at Citi.
However, it is also the relation to other banks that matters.
