International

European Banks UniCredit And SocGen Plan Merger

Italy’s UniCredit and French rival Société Générale are planning to merge, which could lead to other big banking mergers throughout Europe.

According to the Financial Times, sources say that Jean-Pierre Mustier, UniCredit’s French chief executive, has been working on the idea for several months.

While the sources said SocGen directors were investigating the possibility of a merger, the bank has denied “any board discussion regarding a potential merger with UniCredit.”

SocGen, whose investment bank Mustier once ran, would help the Italian lender bolster its investment banking and eastern European operations. And for SocGen, there is the opportunity to take a leading position in Italy and Germany in retail and corporate banking.

Mustier has been focused on SocGen for awhile. In fact, during the Italian bank’s €14bn capital increase last year, he told staff he wanted UniCredit’s market capitalization to surpass SocGen’s. At Friday’s (June 1) close, UniCredit was valued at nearly €33bn compared with SocGen’s €32bn.

But it could be a long road towards a merger. Italy’s volatile political situation, as well as opposition to foreigners owning or running Italian businesses, could both be obstacles for the banks.

In addition, neither bank would be ready to proceed with a deal for at least a year, according to sources. UniCredit has been hit hard by billions of euros of non-performing loans, while SocGen is still dealing with an investigation into its involvement in the Libor rate-rigging scandal. Its share price has dropped 13 percent so far this year.

This isn't the first deal UniCredit has recently considered. Last year the bank reportedly held talks with German government officials about a possible acquisition of Commerzbank AG following its restructuring. The deal would combine Commerzbank, Germany’s second-largest lender, into UniCredit, Italy’s largest. The combined entity would have more than $1.6 trillion in assets, according to reports, and would increase UniCredit’s access to small- and medium-sized businesses (SMBs).

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