What European banks need before mergers can save them
The coronavirus recession makes the need for bank consolidation in Europe even more pressing. But neither a more accommodative stance on M&A at the ECB nor the EU’s new recovery fund will be enough to make it happen.
European banks must revolutionise their business models – even the European Central Bank recognises this now.
In new draft guidance, the ECB signals it won’t stand in the way of mergers, including cross-border deals in the EU. This is at a time, moreover, when hope in Europe’s united future is surging, thanks to the €750 billion EU recovery fund.
One big merger is already under way: the continent’s biggest bank takeover for a decade. Intesa Sanpaolo’s €5 billion bid for local rival UBI Banca is raising hopes, at the very least, of more mergers in Italy’s fragmented banking market.
But are would-be M&A advisers and financial journalists getting ahead of themselves?
|Jean Pierre Mustier,
“I’m not quite sure Covid will speed up domestic M&A as well as cross-border M&A,” warns Jean Pierre Mustier, chief executive of UniCredit, and president of the European Banking Federation, during a Euromoney Livestream interview in July.
The UBI deal might not trigger a wave of immediate mergers. Deals are unlikely to happen without a lot of government support – in part because of a lack of banks that are confident enough to take on the costs and risks of a takeover now.