MILAN (Reuters) -The drawbacks of Tuscan bank Monte dei Paschi’s bid for Mediobanca are even more evident under the current worsening macroeconomic scenario, Mediobanca CEO Alberto Nagel, who opposes the bid, said on Wednesday.
Monte dei Paschi (MPS), for a decade at the fore of Italy’s banking crisis until a 2017 state bailout, shocked the country’s financial sector this year by making a bid for Mediobanca, a revered financial institution with a current market capitalization of 12 billion euros ($13.27 billion).
Mediobanca’s board rejected the rival’s takeover offer in January saying a tie-up lacked any strategic and financial rationale and would be detrimental to its shareholders.
The drawbacks of a combination with a commercial bank “today are even more evident, because we are facing a completely different macroeconomic scenario,” Nagel said, speaking at a closed-door event, as confirmed by a bank spokesman.
“Indeed, there is likely to be a recession, which may also be accompanied by a decline in rates. The combination of these two elements has a negative impact, particularly on commercial banks since they are more exposed to SMEs (small and medium-sized companies) and have benefited more than others from rising rates,” he added.
Monte dei Paschi’s CEO Luigi Lovaglio said on Tuesday that the current turbulent market situation would not impact the deal.
The bid is unusual because the two banks have complementary business models and few overlaps, which reduces the scope for the staff cuts that normally drive savings in bank mergers.
MPS is betting instead on tax credits stemming from past losses which it will be able to use in larger measure if it secures 50% plus one share of Mediobanca.
It also envisages boosting revenues and cutting some costs by unifying certain roles, such as risk control.
Nagel said Mediobanca should “stay focused on what we do, avoiding transactions that dilute the brand and our results with players that are significantly weaker in terms of business model, revenue diversification and asset quality.”
($1 = 0.9045 euros)
(Reporting by Gianluca Semeraro, editing by Gavin Jones)
