Crippled Italian bank plotting a £55bn merger

TWO of Europe’s biggest banks are considering a £55bn merger that would be the biggest banking tie-up since the financial crisis.

Italian lender Unicredit, worth £28.6bn, and France’s £26.8bn Societe Generale are said to have held early discussions about joining forces amid a global takeover frenzy.

It would be the largest such deal in Europe since Royal Bank of Scotland spent £49bn on Dutch rival ABN Amro in 2007 – an illjudged agreement that almost destroyed both companies.

Unicredit’s chief executive JeanPierre Mustier, who spent the first 22 years of his career at Societe Generale, has reportedly been pushing for a deal for months but talks are said to be at an early stage. Mustier is thought to see expansion beyond sluggish Italy as the best way to ensure Unicredit’s long-term survival.

He had initially hoped to get the merger done in the next 18 months but this won’t happen because of political turmoil in Italy, which has elected populist parties and suffered from speculation its membership of the euro is at risk.

Unicredit, which has its headquarters in Milan (pictured), has faced concerns it is weighed down by bad debts. Last year it raised £11.2bn from the markets, unveiling a plan to axe 14,000 jobs and shut 944 branches.

Meanwhile, Societe Generale last night agreed to pay £750m to settle allegations of Libor rate-rigging and corruption in Libya. Its investment bank has also struggled due to stagnation in the French economy. It is not thought that either bank will be in a position to pursue a deal for at least a year, with the turnaround at Unicredit expected to last until midway through 2019.

Mustier has spoken out before about the need for banks on the Continent to bulk up.

He is said to have approached Germany’s Commerzbank last year but was rebuffed by its management.

A takeover deal would be a vindication for the 57-year-old, who was once seen as a leading contender for the top job at Societe Generale but was later forced to quit because he had failed to spot a £4.3bn rogue trading scandal.

The European Central Bank is thought to be keen to create a bank with roots in more than one eurozone country, as it is hoped this would improve relations between the bloc’s members.

However, regulators scarred by the financial crisis are also likely to have concerns about allowing the largest players to get any bigger.

If combined, Societe Generale and Unicredit would be larger than Barclays, Lloyds and Royal Bank of Scotland. Only the £146bn global powerhouse HSBC would be bigger.

In a note to investors last night, stockbroker Jefferies said: ‘Regulators are in favour of European consolidation.

‘However, this has been more in favour of smaller players rather than a cross-border deal between two large players.’