UniCredit Has Flexibility for Banco BPM Deal, Deutsche Bank Says

(Bloomberg) -- UniCredit SpA's new shareholder remuneration policy gives it leeway to pursue an acquisition like a takeover of domestic rival Banco BPM SpA, according to a Deutsche Bank AG analyst.

Significantly leveraging buybacks to reward investors increases Milan-based UniCredit's flexibility in mergers and acquisitions, Deutsche Bank analyst Giovanni Razzoli wrote in a report Wednesday. Instead of cancelling the shares, UniCredit could use them as an acquisition currency, according to the report.

A deal for Banco BPM, which has a market value of 4.2 billion euros ($4.8 billion), would give UniCredit an “added advantage” by boosting its Italian market share, Razzoli wrote.

UniCredit recently re-rated after an investor day where the bank set ambitious targets for buybacks. At the same time, the move by UniCredit Chief Executive Officer Andrea Orcel, seen as one of the most successful financial services dealmakers, to walk away from negotiations to buy Banca Monte dei Paschi di Siena SpA has tempered expectations of further deals.

An acquisition of Banco BPM would be in line with guidelines that UniCredit has outlined for M&A, including strategic consistency and an ability to be accretive in a reasonable time, Razzoli wrote. UniCredit's earnings per share should rise to 3.1 euros in 2024 if it acquires Banco BPM, as compared to 2.9 euros in a standalone scenario, according to the analyst.

Dealmaking in the banking industry picked up significantly last year in Europe, particularly with in-country consolidation. UniCredit and BNP Paribas SA, France's largest lender, are widely seen as possible consolidators.