Italy takes step towards possible bank M&A with Monte Paschi stake sale
Govt placed 15% of bailed-out MPS for 1.1 bln euros
Rival Banco BPM took 5%, fund manager Anima 3%
Banco BPM has bid to buy Anima, which is also an MPS partner
Italy retains 11.7% of MPS
By Valentina Za and Giuseppe Fonte
MILAN, Nov 14 (Reuters) -Italy has taken a step to paving the way for a third big banking group in the country by selling a chunk of state-owned Monte dei Paschi di Siena (MPS) BMPS.MI to rival Banco BPM BAMI.MI and the fund manager partner of both lenders.
Shares in MPS jumped 10% in early trade on Thursday after the Italian government said late on Wednesday it had raised 1.1 billion euros ($1.2 billion) by selling 15% of the Tuscan bank it rescued seven years ago to a group of Italian investors.
Banco BPM bought a 5% stake, it said late on Wednesday, adding it had no plans to seek European Central Bank approval to cross the 9.9% threshold and stuck by its standalone strategy.
An eventual tie-up with Banco BPM, however, is one of the possibilities for MPS, a senior government official told Reuters, a combination long favoured by the Treasury.
Conservative Prime Minister Giorgia Meloni and Economy Minister Giancarlo Giorgetti have repeatedly said the reprivatisation of Monte dei Paschi should pave the way for the emergence of a third large player alongside industry leaders Intesa Sanpaolo ISP.MI and UniCredit CRDI.MI.
Banco BPM has consistently denied any interest in a merger, and said its would boost earnings through MPS dividends, but analysts said cost cuts could buttress profits as interest rates decline.
Shares in Banco BPM rose 4.7% in early trade.
Italy's Treasury, which now owns just 11.7% of MPS, has repeatedly made the case for a merger to Banco BPM CEO Giuseppe Castagna, sources previously told Reuters.
Banco BPM's main investor is France's Credit Agricole CAGR.PA.
"With the state on track to exit MPS ... , MPS will likely become an M&A target, and longer term, Banco BPM remains one of the potential bidders in our view," JPM analysts said in a note. "With lower interest rates ... we would not completely rule out a takeover of MPS by Banco BPM in a year's time."
Banco BPM's move gives it an edge over BPER EMII.MI, another mid-sized Italian lender which was also seen as a potential MPS partner.
BPER's leading shareholder, insurer Unipol UNPI.MI, had said it could buy an MPS stake from the government if it could partner with MPS in insurance.
Banco BPM's move also has implications for UniCredit CRDI.MI which is pursuing a potential deal with Germany's Commerzbank BAMI.MI.
Bankers had said Banco BPM, which UniCredit has looked to buy in the past, or even MPS could be a fall-back option if the German project failed.
STRONG DEMAND
Italy's Treasury sold twice the amount of MPS shares it had initially planned due to strong demand, at a premium of 5% to Wednesday's closing price of 5.52 euros a share.
That compares with a price of 2 euros a share at which MPS with great difficulty pulled off a make-or-break new share issue two years ago to raise money to finance thousands of voluntary early staff exits.
Under CEO Luigi Lovaglio, a veteran former UniCredit executive, MPS has restructured since then, and seen its profits boosted by higher rates like other Italian lenders.
With rates declining, banks are moving to find alternative sources of revenue.
Banco BPM last week said it would spend 1.6 billion euros to buy out other investors in fund manager Anima Holding ANIM.MI, a move that would grow its fee income.
Anima sells its funds also through MPS branches under a contract that runs to 2030. On Wednesday Anima said it had bought 3% of MPS, raising its overall stake to 4%.
Delfin, the holding company of late billionaire Leonardo Del Vecchio, and Francesco Gaetano Caltagirone, who holds stakes in both Anima and BPM, each took a 3.5% stake in MPS.
Italy acquired 68% of MPS in the 2017 bailout. The latest placement brings its residual stake to 11.7%.
($1 = 0.9483 euros)
Reporting by Valentina Za in Milan and Giuseppe Fonte in Rome; Editing by Susan Fenton
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