Italian Banco BPM to take in-house insurance in a new plan

A woman walks past the Banca Popolare di Milano (BPM) bank in downtown Milan, Italy on January 29, 2016. REUTERS / Alessandro Garofalo

  • Aim for a net profit above 1 billion euros in 2024
  • Q3 net profit 110.7 mln euros vs. 78 mln forecast
  • CEO says happy to go it alone, but will monitor mergers and acquisitions

MILAN, Nov. 5 (Reuters) – Italian Banco BPM (BAMI.MI) on Friday announced plans to acquire full ownership of its insurance partnerships as part of a new multi-year plan aimed at making a profit net of more than one billion euros. ($ 1.2 billion) in 2024.

The new profit target and quarterly results, both above analysts’ expectations, pushed shares of Italy’s third-largest bank up 5.6%, outperforming a 1% increase for the blue chip index of Milan (.FTMIB).

Banco BPM will exercise the rights to integrate its insurance joint ventures with the Italian Cattolica (CASS.MI), recently acquired by Generali (GASI.MI), and the British Aviva (AV.L).

Banco BPM also manages a consumer credit activity in collaboration with Crédit Agricole de France (CAGR.PA), while it relies on Anima (ANIM.MI), of which it holds 19.4%, for asset management.

The Italian bank takes the example of Intesa Sanpaolo (ISP.MI), which has withstood a difficult environment of negative interest rates better than other banks thanks to its wealth management and insurance activities.

UBI, another midsize player like Banco BPM, had also planned to provide insurances internally before receiving an unsolicited takeover bid from Intesa.

Banco BPM, born in 2017 from the merger of two regional cooperative banks, wishes to make net commissions its main profit driver, with growth of 8% per year on average over the period 2021-2024 to more than compensate for the stagnation of revenues net of interest.

Overall revenues are expected to increase by 2.4% per year.

The new net profit target is to be compared to the 649 million euros of Banco BPM achieved in 2019, before the pandemic.

“The emphasis that Banco BPM places on its ‘product businesses’ and in particular those of ‘bancassurance’, we believe that it can help improve the value of the group in a merger and acquisition scenario,” said Fabrizio Bernardi , analyst at Bestinver.

Banco BPM was on the hunt for a merger partner after mid-level rival UBI was acquired by Intesa last year.

CEO Giuseppe Castagna failed to strike a deal with BPER Banca (EMII.MI) and said on Friday that consolidation had come to a halt.

“We are very happy to be ‘self-sufficient’ now because we have ambitious goals to achieve,” he said.

He added that Banco BPM would continue to pay attention to all possible merger opportunities.

With its roots in the wealthy Lombardy region, Banco BPM is widely regarded as the ideal geographic solution for UniCredit (CRDI.MI), which is under pressure to strengthen its domestic footprint and catch up with Intesa, but the past month has drifted away from the acquisition of the state-owned Monte dei Paschi (BMPS.MI).

Castagna said Banco BPM had no interest in Monte dei Paschi or Banca Carige (CRGI.MI), another bailout candidate, as their size did not match his bank’s plans.

Banco BPM reported on Friday net profit of 110.7 million euros in the third quarter, well above the consensus of 78 million euros compiled by Reuters.

He set a dividend payout ratio of 40% as part of the multi-year plan, which analysts see as conservative, leaving the bank with a capital cushion for potential deals.

($ 1 = 0.8651 euro)

Reporting by Andrea Mandala and Valentina Za Editing by Alexander Smith and Mark Potter

Our Standards: Thomson Reuters Trust Principles.

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