UBI expected to extend insurance partnership with Cattolica as M&A looms - sources

By Andrea Mandala MILAN (Reuters) - Italy's UBI is set to extend an insurance partnership with Cattolica for a limited time, sources familiar with the matter said, delaying longer-term decisions while it waits to see how consolidation among mid-sized banks plays out. Italy's fifth-largest bank is seen playing a leading role in a new round of M&A between second-tier lenders grappling with negative rates, a stagnating economy and a digital revolution in the industry. UBI had been planning to reorganise its insurance operations, valued at 1 billion euros, under a three-year program it will unveil next month and had been looking for a new partner

Reuters January 29, 2020 03:07:11 IST
UBI expected to extend insurance partnership with Cattolica as M&A looms - sources

UBI expected to extend insurance partnership with Cattolica as MA looms  sources

By Andrea Mandala

MILAN (Reuters) - Italy's UBI is set to extend an insurance partnership with Cattolica for a limited time, sources familiar with the matter said, delaying longer-term decisions while it waits to see how consolidation among mid-sized banks plays out.

Italy's fifth-largest bank is seen playing a leading role in a new round of M&A between second-tier lenders grappling with negative rates, a stagnating economy and a digital revolution in the industry.

UBI had been planning to reorganise its insurance operations, valued at 1 billion euros, under a three-year program it will unveil next month and had been looking for a new partner.

But the sources said it would likely opt for a short-term extension of its bancassurance joint-venture with Cattolica , which expires in December.

It could also extend a life insurance joint-venture with Britain's Aviva beyond December, they added

Aviva and Cattolica, Italy's fifth-biggest insurer whose top investor is Warren Buffett's Berkshire Hathaway , declined to comment.

Asked about the possible extension of the Cattolica partnership on the sidelines of an event on Tuesday, UBI CEO Victor Massiah said multiple discussions were ongoing and the bank would inform the market in due course.

Italian lenders are increasingly betting on insurance to buttress weakening banking revenues.

Following Intesa Sanpaolo's lead, UBI had also mulled bringing in-house its insurance business, which accounted for 15% of net profit between January and September and comprises of the stakes in the two joint-ventures as well as small insurer BAP Assicurazioni.

Bancassurance deals -- which allow an insurance company to sell its products to a bank's clients -- could also play a role in potential tie-ups, which are expected to involve UBI and rivals Banco BPM and BPER Banca as well as state-owned Monte dei Paschi di Siena .

Large scale bad loan disposals, a more stable political environment and limited room for further cost cuts are set to make consolidation among Italian banks easier, according to Goldman Sachs.

"I believe UBI could start thinking about M&A in 2020", Giandomenico Genta, chairman of UBI's top investor Fondazione Cassa di Risparmio di Cuneo (CRC), told Reuters.

With its 6% stake, CRC leads a consultation pact among shareholders holding in aggregate 18% of UBI.

Shareholder support could smooth the path for a tie-up between UBI and BPER, whose insurance partner UnipolSai is also its top investor with a 20% stake, one banker said.

"They're the best fit," broker Equita said, noting that BPER and UBI could sell part of their insurance, asset management or debt collection businesses to cover the restructuring costs of any merger.

Genta said the deciding factors for a tie-up would be the size of a capital increase that regulators would likely require and how many branches may need closing due to overlapping business.

Goldman Sachs recently flagged UBI's "strong position" as a consolidator, saying it had a better risk profile than its peers.

UBI is widely regarded as the best candidate to take on Monte dei Paschi, which the state must re-privatise by the end of next year.

Genta said BPER would a good option as would Monte dei Paschi after a planned bad loan clean-up, while a business overlap and a cash call estimated by analysts at 2 billion euros made Banco BPM a less palatable choice.

(Reporting by Andrea Mandalà; editing by Valentina Za, Kirsten Donovan and David Gregorio)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.