LIVE MARKETS-Looking at Italian banks M&A? Handle with care!

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

LOOKING AT ITALIAN BANKS M&A? HANDLE WITH CARE!

Consolidation among Italian banks is heating up again but navigating the country's intricate and fragmented financial system can make it challenging for equity investors to capitalise on this trend.

Citi has an interesting, and perhaps counterintuitive, take for would-be investors.

It believes Intesa Sanpaolo ISP.MI - the only big bank that is not currently involved in any deal - is the best way to play this new wave of mergers and acquisitions.

"We question some of the potential benefits of pending transactions (especially for the market)," writes Azzurra Guelfi, long standing analyst at the US bank.

She notes that price moves that followed the two recent paper offers, by Monte dei Paschi for Mediobanca and by BPER for Pop Sondrio, indicate the market is either sceptical about the potential benefits of these deals or seeks a higher premium.

Additionally, Guelfi expects high scrutiny from EGM, as well as regulators likely focusing on issues ranging from industrial merits and the treatment of minority shareholders.

"In both cases, the acquiring banks have large shareholders, and some are in common with the targets," she notes.

To conclude, Citi views Intesa as the best Italian bank bet, given its lack of M&A exposure and strong business model.

"It... could potentially gain customer/market share organically as competitors focus on M&A."

(Danilo Masoni)

EUROPE BEFORE THE BELL:

"SHORT COVERING IS DONE... BUT DON'T FADE EUROPE YET" CLICK HERE

RAFT OF POSITIVE EARNINGS KEEP STOXX SWEET CLICK HERE

GAINS AHEAD ON SWEET EARNINGS, CPI LOOMS CLICK HERE

MARKETS LOOK TO US CPI WITH ONE EYE ON TARIFFS CLICK HERE