UniCredit is working with strategic advisers Goldman Sachs and JPMorgan, three people close to the matter said, as it prepares to update its business plan next year and weighs a potential acquisition of state-owned peer Monte dei Paschi.
Italy is seeking a buyer for Monte dei Paschi (MPS) which it rescued in 2017 spending 5.4 billion euros ($6.4 billion) for a 68% stake, which it is now looking to cut with help from advisers Bank of America and Orrick.
UniCredit had been identified as the ideal partner given its robust balance-sheet but smaller rival Banco BPM also remains a possibility, people familiar with the matter have said.
UniCredit has ruled out mergers and acquisitions but sources have said it may consider a deal similar to the one struck by Intesa Sanpaolo in 2017, when it bought the good assets of two failing banks for 1 euro and the state stepped it to neutralise the impact on its balance sheet and protect it from legal risks.
UniCredit is working with Goldman Sachs and JPMorgan on a business update it plans to present to the market in the second quarter of 2021, one of the sources said.
JPM declined to comment while GS was not immediately available for a comment.
CEO Jean Pierre Mustier has said UniCredit would focus on the digital acceleration driven by the pandemic in the plan, to illustrate “the lessons learnt” in the healthcare emergency.
The other two sources said JPM and GS, two investment banks traditionally close to UniCredit, were also expected to provide advice on MPS if the conditions for a deal came into place.
To re-privatise the loss-making bank as it has agreed to do to win European Union approval for the bailout, the Treasury is considering various options, including a share exchange offer the buyer would launch, one of the sources said.
To lure a buyer, Rome is reading a package of incentives while also attempting to tackle the main hurdle – some 10 billion euros in pending legal claims MPS faces after years of mismanagement.
Rome has also included in the 2021 budget, which is due to be approved by Dec. 31, incentives to spur mergers by allowing banks to use past tax losses to cut their tax burden.
In the case of MPS the scheme, which is being challenged by the co-ruling 5-Star Movement, would entail a 3 billion euro benefit for the buyer, though a fee would be charged.
Italy has already earmarked 1.5 billion euros for MPS which it could use to cover at least part of a capital shortfall which is expected to top 2 billion euros following a bad loan clean-up and provisions against legal risks.
The Treasury is also considering measures to help banks sustain the cost of layoffs in the event of a merger.