European banks headed for mergers

NEGOTIATIONS: ABN Amro, as well as Societe Generale and UniCredit, are reportedly in talks about potential takeovers, but their executives are tight-lipped about details


Mon, Apr 23, 2007 - Page 10

A new round of mergers in the European banking industry may be taking hold as a battle for Dutch bank ABN Amro Holding NV heats up and France's Societe Generale SA and Italy's UniCredit SpA reportedly enter talks.

German daily Handelsblatt reported on Friday that Societe Generale chief Daniel Bouton and UniCredit head Alessandro Profumo had begun discussions, adding to several days of speculation over the two firms.

But Societe Generale later said in a statement that no negotiations of that kind were occurring, while UniCredit refused to comment.

As for ABN Amro, officials from the Dutch bank were set to meet today with a consortium comprising Britain's Royal Bank of Scotland Group Plc, Santander Central Hispano SA of Spain and Belgian-Dutch group Fortis.

ABN Amro, the biggest Dutch bank, is currently in exclusive talks with British bank Barclays Plc, the UK's third-largest bank, over a potential takeover. They have yet to disclose a price or terms.

Mergers between European banks have occurred to some degree in recent years, including Santander's purchase of Britain's Abbey National in 2004 and France's BNP Paribas' deal for Italy's BNL last year.

But the recent talks seem to mark a new stage in activity.

Shares in French banking group Societe Generale hit record high points last week on rumours that UniCredit was planning a takeover bid.

A merger between them would create the second-largest bank in Europe behind Britain's HSBC, and the seventh-largest in the world with a market capitalization of about 150 billion euros (US$204 billion). It would include 45 billion euros in annual revenue.

It would also mean the end of an era for Societe Generale, which has taken a prudent approach with modest acquisitions since failing to merge with Paribas in 1999.

The bank has remained a relatively affordable target because of its average capitalization.

Millan Gudka, an analyst with Dresdner Kleinswort, said the deal would make sense "because the two companies have complementary activities," with "most synergies occurring in finance and investment banking."

Credit Suisse values the synergies at 2.1 billion euros and also identifies potential savings in technology and administrative areas.

Analysts also note the apparent good relations between the two banks, shown by Societe Generale co-CEO Philippe Citerne's presence on UniCredit's board until December 2005.

But analysts do not expect fast movement on a merger or takeover.

Jean-Pierre Lambert, analyst at Keefe, Bruyette and Woods, named obstacles such as the French presidential election and the integration of German bank HypoVereinsbank (HVB) following its purchase by UniCredit in 2005.

In London, meanwhile, a spokeswoman for the UK Financial Services Authority (FSA) said on Saturday that the lead regulator of the bank that would be created by the possible merger of Barclays and ABN Amro hasn't yet been agreed on.

The FSA "remains in close contact with the Dutch National Bank," Cerris Tavinor, a spokeswoman for the London-based regulator, said in a telephone interview.

The two bodies will decide on the "appropriate regulatory arrangements including the identity of the lead regulator," she said.

The proposal by London-based Barclays that the Dutch central bank take over as its main regulator should it buy ABN Amro is being questioned by the FSA, the Financial Times reported on Saturday, citing unidentified people familiar with the talks.

The UK regulator judges that while the new group would have its headquarters in Amsterdam, its "center of gravity" would be in the UK, the newspaper said.

If the FSA doesn't agree to let the Dutch Central Bank be the lead regulator, a "key" concession Barclays is making to ABN Amro to complete the transaction would be undermined, the Financial Times said.