International Monetary Fund (IMF) Managing Director Kristalina Georgieva (L) looks at European Central Bank president Christine Lagarde (R) as they attend the annual meeting of the World Economic Forum (WEF) in the Alpine resort of Davos on January 24, 2025. (Photo by Fabrice COFFRINI / AFP)
DAVOS: Heading into the glitzy World Economic Forum, the thinking was it would be the perfect place for many of the biggest deals in the works among Europe’s lenders to inch their way into existence.
There’s BBVA’s takeover offer for its smaller rival Banco de Sabadell SA, for instance. Or UniCredit SpA’s bid for its domestic competitor Banco BPM SpA as well as its growing interest in Germany’s Commerzbank AG.
For months, all three deals have faced resistance from either the target or other stakeholders including governments. The hope was they might finally come around at Davos, known for its ability to get chief executive officers in a room together in order to hash out their differences.
That’s not quite what happened.
Instead, Commerzbank chief executive officer Bettina Orlopp ratcheted up her rhetoric against UniCredit – labelling the recent overtures “hostile” in a clear escalation of her defence against the unwanted deal.
The German government, which is still holding a 12% stake in the bank, is saying similar.
Sabadell announced its considering moving its legal domicile back to Catalonia, as its seeks to muster political support to help it fight against BBVA’s bid.
Last Friday came the shock announcement that Banca Monte dei Paschi di Siena Spa would seek to acquire its bigger rival Mediobanca SpA, adding to the flurry of complicated takeover talks.
Mediobanca considers the approach by the world’s oldest bank as hostile and will likely end up rejecting it, Bloomberg reported last week.
It all underscored the fact that even after years of waiting, European banks and their governments are still resisting the urge to consolidate faster.
That’s despite calls from regulators, dealmakers and governments alike are growing that more radical combinations are needed so the continent’s lenders can become the behemoths they need to be in order to finance the growth Europe needs.
Just hours before the shock announcement last Wednesday by Commerzbank’s Orlopp, she was spotted wandering through the icy streets of Europe’s highest city and having lunch at a small eatery with her communications chief.
Down the street, UniCredit’s Andrea Orcel explained that there had been various meetings with both the German government and Commerzbank executives before his bank took control of about 28% of Commerzbank.
“Commerzbank was the first call we had in the morning to debrief” after the Italian lender acquired a large stake last year, he said in an interview with Bloomberg TV’s Francine Lacqua. “From there, it moved to surprise. Well, imagine ours. And then it moved to hostility or to opaqueness.”
BBVA’s chairman Carlos Torres was seen running up Davos’s main drag. Hundreds of miles away, Sabadell said its board would begin meeting to discuss the possible headquarters move as it seeks to muster political support to help it fight against the hostile bid.
Over at the confab’s annual meeting, Banco Santander SA chair Ana Botin faced a series of questions about whether she’d ever consider selling her business in Britain, where headaches have begun to pile up as the bank braces for a potentially costly review into its motor-finance business.
“We love Britain,” Botin said. “It’s a core market and will remain a core market for Santander. That’s it.”
Lenders’ resistance to do deals has come even as a growing chorus of regulators are supportive of cross-border banking mergers across Europe.
Christine Lagarde, president of the European Central Bank, has said such deals would be good for the region if it allows lenders to better compete against their rivals in the United States and China.
“The good thing is that we identified the issue which is the competitiveness of Europe,” said Luca Bocca, chief financial officer of Intesa Sanpaolo SpA, who added that cross-border deals will be difficult to execute. “There needs to be flexibility that accounts for regional structural differences.” — Bloomberg
