European banks need to join forces if the region is to withstand competition from the United States and China but without a banking union, cross-border mergers do not make sense, the head of Italy’s biggest bank Intesa Sanpaolo (ISP.MI) said on Monday.
Speaking to CNBC television, Carlo Messina said it was currently hard to achieve the cost savings that investors expect a merger to produce in the case of a cross-border transaction, noting that they would want to see an increase in dividends and earnings per share.
“You need synergies and the area where investors are looking for synergies is cost,” he said, adding it was not easy “to deliver real cross-border synergies on the cost side”.
“I think we’ll need to wait for a banking union to see real, significant cross-border consolidation. But we need to do it otherwise Europe will remain an insignificant group of countries,” he said.
Echoing comments by Andrea Orcel, the CEO of Italy’s second-biggest bank UniCredit (CRDI.MI), Messina said large banks were necessary to support the bloc’s economy.
Orcel last month said Europe was destined to “irrelevance” if it did not work to unify its capital markets and create a banking union that allowed lenders to compete with U.S. rivals and adequately finance the region’s economy.
Messina said it would be easy for Intesa to achieve cost savings if it expanded domestically, but it ran into antitrust issues after acquiring smaller rival UBI in 2020-2021.
Intesa has a 30% market share of deposits and mutual funds, and 20% of insurance products, the CEO said.
“We have a significant antitrust problem, so this will probably make it impossible for us to do acquisitions in Italy, other banks can try,” Messina said.
He added that Intesa had been one of the “very few” European lenders in recent years to heed calls for consolidation from the European Central Bank’s Chief Supervisor Andrea Enria.
Source : Reuters