Chief executive Andrea Orcel said that Unicredit is well placed to secure a beneficial deal with the Italian government in talks to take over Monte dei Paschi di Siena, which it sees as the best M&A option at present. Orcel defended the merits of a possible MPS acquisition as UniCredit posted a higher than expected second-quarter net profit. This is a day after agreeing to enter exclusive negotiations over the bailed-out rival.
Italy’s No.2 bank said that it had signed an accord with the Treasury setting guidelines for a potential takeover of MPS. UniCredit, which had long rebuffed government pressure to buy MPS, said that it would only acquire selected parts of the lender in a deal that would leave its capital buffers unchanged while boosting earnings per share by a double-digit percentage. Chief Executive Andrea Orcel said that discussions will unfold over the next few weeks with a decision expected by mid-September. He reported that they strongly feel that, with the principles they have highlighted, given the timing and the ability to select what they buy, Monte dei Paschi is the best option, and the only option on the table at this point.
Orcel said that the deal would allow significant cost cuts and boost UniCredit’s market position in Italy. UniCredit would be shielded from legal risks weighing on MPS following years of mismanagement. Shares in UniCredit rose 2.5%. MPS surged 7%. MPS faces a capital shortfall of up to 2.5 billion euros and banking stress test results due later are set to turn the spotlight on to its frail finances. UniCredit improved its 2021 outlook for loan loss charges. Net profit for the April-June period came in at 1.03 billion euros versus a company-provided analysts’ average estimate of 736 million.
UniCredit said that it now expects its cost of risk. Shrinking loan losses also helped drive profits at Barclays and Santander. Revenue totalled 4.4 billion euros, above an average 4.3 billion forecasts, with fees rebounding by 21% from a year ago when Italy enforced a strict lockdown to fight the pandemic. Higher fees and trading income more than offset the yearly decline in interest income. UniCredit has pledged to boost its lending business, with Orcel, hired after predecessor Jean Pierre Mustier fell out with the board over strategy, saying a phase of active retrenchment for the bank was now over.