Banco Popolare SC and Banca Popolare di Milano (BPM) shareholders were yesterday scheduled to vote on a proposed merger to create Italy’s third-largest lender, a much-anticipated accord expected to consolidate the country’s troubled banking sector.
It is not yet a done deal: While the Banco Popolare votes are widely believed to be in the bag, there are fears shareholders at BPM might sink the merger, with two associations of former BPM employees set against it.
BPM on Monday wrote to shareholders to urge them to turn out and cast their ballots at the extraordinary meeting on forging “Banco BPM,” which would be third only to giants Intesa Sanpaolo Banco Popolare and UniCredit SpA.
This is an “important choice” in a “context of great uncertainty for the Italian banking system,” BPM CEO Giuseppe Castagna and board chairman Mario Anolli stressed in the letter.
The merger has been on the books since March and has since received the green light from the European Central Bank, which required Banco Popolare to carry out a capital increase of 1 billion euros (US$1.1 billion), which the bank did.
The merger represents “the best option to lead together and avoid suffering later,” Castagna and Anolli warned.
“The current developments in our industry are an inevitable process, and the dimensional and qualitative jump we will vote for at the assembly will allow us to continue to grow, taking advantage of having made the first move, and face the future with serenity,” they said.
The new bank would have 25,000 employees, 2,500 branches, 4 million customers and would be a leader in northern Italy, one of the richest areas in Europe, managing about 171 billion euros in assets.
With chances for a “yes” win boosted by a large presence of shareholders at the meeting, BPM is covering part of the costs for those who have to travel some distance to attend.
More than 12,000 of the bank’s 50,000 or so shareholders have registered, suggesting record participation at the vote, which needs a two-thirds majority to be valid.
Two associations of shareholder retirees have called on those casting their ballots not to be intimidated, and vote “no” to stop the creation of a bank that would be a giant with “feet of clay, worn away by an enormous mass of deteriorated credit.”
However, the unions, which have negotiated and won concessions on welfare and employee representation, support the merger.
The tie-in would be the first following a landmark reform of cooperative banks passed by Italian Prime Minister Matteo Renzi’s government early last year in a bid to promote consolidation and efficiency.
The reform scrapped restrictions on ownership and voting rules giving shareholders one vote each regardless of their stake.
The collapse of the merger would be a blow to Italy’s troubled lenders, which hold 360 billion euros of bad loans — about one-third of the eurozone’s total — and have been hit by the market turmoil sparked by Brexit.
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