Italy would prioritise savings, SME lending in any Banco BPM-Credit Agricole deal

By Giuseppe Fonte and Valentina Za

ROME (Reuters) -Italy would focus on protecting small business lending and domestic savings in a tie-up between Banco BPM and the local arm of French Credit Agricole, the head of the lower house's finance committee said, adding a bank's nationality was not an issue in itself.

Banco BPM is looking for a merger partner after escaping a takeover attempt by rival UniCredit, with CEO Giuseppe Castagna listing Credit Agricole Italia and Monte dei Paschi di Siena (MPS) as the two main options.

With MPS already involved in an acquisition, a deal with Credit Agricole Italia is seen as easier to pursue.

Government approval would be necessary as Italy can impose conditions on transactions involving key corporate assets on the grounds of national security.

"We don't care if a bank is from Lombardy, Campania or France, we care about protecting savings and lending to small and medium-sized firms, we want banks to be close to local communities," Marco Osnato, a prominent member of Prime Minister Giorgia Meloni's Brothers of Italy party, told Reuters.

His words echo comments by Economy Minister Giancarlo Giorgetti, from the co-ruling League party, who in July said what mattered was whether bankers did their job and support the economy, not their passport.

ITALIAN M&A IN FULL SWING

Banco BPM owns 9% of MPS while Credit Agricole is the biggest investor in BPM, which is Italy's third-largest bank and plays an important role in financing small firms.

With MPS buying merchant bank Mediobanca amid a hectic bank M&A round, a three-way merger would require time, exposing BPM to a potential new UniCredit swoop.

It would also pose major execution risks, while analysts view positively a tie-up between BPM and Credit Agricole Italia.

Italy is Credit Agricole's biggest foreign market, key also for its asset manager Amundi, which partners with UniCredit under a contract expiring in 2027.

With some 3 trillion euros ($3.5 trillion) each in public debt, Italy and France both have large refinancing needs and Meloni has said Italian savings should be invested domestically.

BPM has recently acquired fund manager Anima Holding, whose 200 billion euros in assets include a large portion of Italian government bonds.

"If a deal were ever to materialise, it would be subject to the conditions envisaged by the law, like other deals in this sector have been. Then it'd be a decision for the market," Osnato said.

A tie-up with Credit Agricole Italia would lift BPM's branch market share to 12% from 7%, Deutsche Bank analysts calculated, with an earnings per share boost of 4% already the first year, rising to 25% within three years.

Italy had long sought to build a third large player to rival Intesa and UniCredit by encouraging a merger between BPM and MPS, which it has been successfully reprivatising after a 2017 bailout. UniCredit's swoop on BPM in November derailed that plan.

Credit Agricole, a BPM partner in insurance and consumer credit, became a shareholder in 2022 to help its defence against UniCredit. It increased its holding to just over 20%, with Rome's blessing, after the latest UniCredit move.

($1 = 0.8527 euros)

(Editing by Giselda Vagnoni and Keith Weir)