Banco Popolare and Banca Popolare di Milano (BPM) said Thursday that their merger will create a strong bank that needs all of the employees currently on the books. The two lenders agreed to merge on Wednesday to form Italy's third-biggest bank and the European Central Bank has given preliminary approval after Verona-based Banco Popolare agreed to a one-billion-euro capital increase. "It is absolutely the best possible result," BPM CEO Giuseppe Castagna, who is set to become the chief executive of the merged group, said on Thursday. "A solid bank has been born". Banco Popolare CEO Pier Francesco Saviotti said that there will be no redundancies after the merger. "There won't be any problems regarding the employees, there won't be any sackings," Saviotti told a news conference. "Those who leave will do so because they want to take part in the solidarity funds. "The employees are our strength, just like the clients are". Saviotti said that Banco Popolare had "no alternative" to a capital increase in the light of the ECB requests, which he described as "excessive".
Saviotti had previously ruled out a capital increase, but said the bank would have no trouble raising the money. The combined bank will have around 171 billion euros in assets, 2,500 branches and 25,000 staff, meaning only Intesa Sanpaolo and UniCredit are bigger lenders in Italy.
Banco Popolare's shareholders will have 54% of the new bank, compared to 46% for BPM shareholders.
The merger comes after the Italian government passed a reform of the banking industry aimed at encouraging consolidation in a system many experts consider too fragmented.
Premier Matteo Renzi's government recently had to take action to save four small lenders - including one in which Reform Minister Maria Elena Boschi's father was a vice president.
But the rescue left many investors with worthless shares and bonds in those banks, leading to a huge furore and no-confidence motions that the executive had to fend off. Giuseppe Castagna said the merger will not result in any spinoffs. "We are not obligated to make any sales," he told reporters. "Obviously there will be some rationalizing," he added. "It's possible to find some synergies and through them it will be possible to value some of these assets, including externally, and in ways we will invent while coming up with an industrial plan". Castagna added BPM is not considering any other mergers.
"We face a burdensome task," he said. "Right now we're concentrating on this merger". The merger got a frosty reception on the Milan stock exchange, with BPM's share price losing 5.9% and Banco Popolare's stock 6.63% down. They lost 5.3% and 4.8% respectively by the end of the trading day amid a tough session for European banking stocks.
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