LIVE MARKETS-Italian bank M&A fever: beware of 'sub-optimal' deals

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ITALIAN BANK M&A FEVER: BEWARE OF 'SUB-OPTIMAL' DEALS

Italian bank merger fever has reached new highs and while that promises a sector shake-up, it also carries a growing risk of "sub-optimal" acquisitions, credit rating agency Scope warns.

While generally seeing domestic consolidation as a credit positive – leading to better economies of scale and increased market power – Scope calls for some caution.

"Execution risks, such as overpaying for targets or entering into suboptimal combinations, are rising, particularly as takeover defences, competitive positioning and market share considerations increasingly influence strategic decisions."

That being said, Scope says the outlook for Italian banks remains favourable: "After a solid first quarter, banks are well positioned to weather economic headwinds".

The idea that consolidation in the fragmented Italian banking system might not be too market-friendly is not new.

In February, Citi cautioned that capitalising on this trend might be challenging and advised investors to position on the only bank not involved in any deal: Intesa Sanpaolo ISP.MI.

(Danilo Masoni)

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