Moody's says BPM-Banco merger positive

Combined banks can 'weather more competitive environment'

(ANSA) - Milan, March 25 - Moody's Investors Service on Friday said that the merger between Italian banks Banco Popolare and Banca Popolare di Milano (BPM) is "credit positive" in the long-term for the two banks as well as the entire Italian banking system.
    Moody's said the combined banks, which together will form Italy's third-largest bank, "will be able to weather a more competitive banking environment".
    Moody's cited increased efficiency, revenue diversification, additional capital, and improved governance as positives in its assessment.
    "Both Banco and BPM mostly operate in the relatively wealthy northern Italy, an overlap which offers the opportunity to rationalise their branch networks," the rating agency said.
    "In addition, a larger group could offer a wider range of products in a more efficient manner, which would in turn improve revenue diversification".
    The additional capital from Banco Popolare's agreement to a one-billion-euro capital increase, in light of requests by the European Central Bank prior to giving its preliminary approval, is also seen by Moody's as positive.
    "The proceeds will be used to increase the coverage of problem loans up to 49% from 43% while the bank's Common Equity Tier 1 ratio will remain at its current level; this is credit positive for the senior debt and deposit ratings on both institutions," Moody's said.
    "The merger will also contribute to improved governance, which has so far been a weakness for BPM".