European banks seek alternative cross-border expansion strategies, Morningstar DBRS says

European Banks Turn to Minority Stakes, Partnerships for Cross-Border Growth

Strategies and Trends in European Cross-Border Banking Expansion

MILAN, Oct 22 (Reuters) - Uneven European banking regulation, national barriers to liquidity and capital and political opposition to foreign takeovers have pushed European banks to seek lower-profile ways to grow abroad, credit rating agency Morningstar DBRS said on Thursday.

Cross-Border Investments and Exceptions

• European lenders have stepped up cross-border investments, though UniCredit's takeover offer for Commerzbank remains an exception, Morningstar DBRS said in a note

Shift from Mergers to Alternative Growth Approaches

• With the European Union's banking union project on a stall, lenders are turning to minority stakes, joint ventures and partnerships rather than full mergers

Minority Stakes as a Preferred Route

• Minority stakes, the most visible route according to the credit agency, sometimes near the mandatory takeover threshold or stay below 10% to avoid both European Central Bank authorisation and a stricter capital treatment

Recent Notable Minority Stake Acquisitions

• France's Crédit Agricole raised its stake in Italy's Banco BPM to 29.3% in July, after agreeing in June to acquire 9.9% of Spanish peer Banco de Crédito Social Cooperativo

• In October, unlisted French cooperative banking group BPCE bought around 7% of Spain's Banco Sabadell, saying it would not raise the stake above 9.9%

• UniCredit raised its holding in Alpha bank to around 29.8% in January, after initially buying 9% of the Greek bank in 2023

Joint Ventures and Partnerships

• Banks are also using joint ventures or bank-insurance deals, Morningstar DBRS said, citing the recent partnership between National Bank of Greece and Allianz

Benefits and Limitations of These Strategies

• "These actions offer a lower-risk route to diversify earnings ... however, they provide limited management control and still consume capital", it said

(Reporting by Valentina Za; Editing by Xevi Fontdegloria)