Financial industry: The world's oldest bank is planning the next billion-dollar coup

The world's oldest bank, Monte dei Paschi di Siena (MPS), has unveiled plans to merge with two other Italian banks, Banco BPM and Banca Generali, in a bold move aimed at preserving its independence amid growing pressure from rival financial institutions. The announcement came on Friday, with MPS proposing a takeover offer primarily in its own shares, valuing BPM at €25.3 billion and Banca Generali at €8.7 billion. The combined entity would boast a total balance sheet of €466 billion and manage assets totaling €810 billion, positioning it among Europe’s top ten banking groups. This strategic maneuver is part of a broader effort by MPS to resist a potential acquisition by Intesa Sanpaolo, which had previously submitted a €31 billion bid for the historic institution. The initiative is largely attributed to Luigi Lovaglio, chairman of MPS, who has been actively pushing for this course of action. His goal is to prevent the bank from being dismantled by Intesa Sanpaolo, which had proposed a takeover earlier this year. Intesa, however, is not seeking full control over MPS. Instead, it aims to acquire approximately half of MPS’s 1,200 branches and retain key central functions while transferring the MPS brand and some operations to Unipol, an insurance company. This strategy would allow Intesa to bolster its affiliated bank, BPER, where Unipol holds a significant stake. Intesa is particularly interested in acquiring Mediobanca, a subsidiary of MPS, as well as its wealth management division and the 13% stake in Generali held by MPS. For many, the prospect of Intesa taking over MPS represents more than just a business decision, it signals the end of a centuries-old institution. Founded in 1472, MPS is one of the oldest continuously operating banks in the world, and its survival has become a symbol of resilience and tradition. The idea of its dissolution has sparked widespread concern, especially among local authorities and regional leaders who have voiced their opposition to the potential collapse of the bank in its current form. These concerns have now extended beyond local levels, with national political figures stepping in to support MPS’s continued existence. Prime Minister Giorgia Meloni and Vice Premier Matteo Salvini, leader of the governing party Lega, have publicly expressed hope that MPS will remain intact. Their stance reflects a broader political agenda that seeks to maintain a competitive banking landscape in Italy. Both leaders have criticized the Intesa proposal for potentially strengthening Unipol and its associated bank, BPER, which they argue aligns more closely with leftist political factions. This sentiment underscores the complex interplay between economic interests and political ideologies in shaping the future of Italy’s financial sector. In recent years, the government led by Meloni has pursued policies designed to foster competition within the banking industry, rather than allowing the dominance of the two largest players, Intesa Sanpaolo and UniCredit. As part of this strategy, Finance Minister Giancarlo Giorgetti effectively blocked UniCredit’s attempt to acquire Banco BPM last year. Whether the government will take similar steps to protect MPS remains uncertain. The state’s ownership stake in MPS, which once helped rescue the bank from financial ruin through substantial subsidies, has dwindened below five percent, leaving the institution increasingly reliant on private capital. The proposed merger presents a formidable challenge for MPS. Integrating three major banks simultaneously would require meticulous planning and coordination. The success of this endeavor hinges on several factors, including regulatory approvals, shareholder support, and the ability to navigate the complexities of merging such large entities. If successful, the new bank could reshape the Italian financial landscape, ensuring that one of the country’s most storied institutions continues to thrive in the modern era.