Banca Monte dei Paschi di Siena Defies Odds with 24% Profit Surge, Eyes Mediobanca Bid Amid Turbulence

In a sector still nursing wounds from years of instability, Banca Monte dei Paschi di Siena (BMPS) has delivered a rare bright spot: a 24% year-on-year surge in Q1 2025 net profit to €145 million, defying market skepticism and setting the stage for its audacious hostile bid for Mediobanca. The profit leap, fueled by cost cuts and fee growth, underscores MPS’s turnaround under CEO Luigi Lovaglio—but the question remains: Can this momentum overcome the hurdles of its €12 billion takeover battle?

A Turnaround Born of Crisis

The rise of MPS from near-collapse in 2017 to a bold consolidator in 2025 is nothing short of remarkable. After requiring a €20 billion state bailout, MPS slashed costs, sold non-core assets, and stabilized its balance sheet. A €2.1 billion capital increase in early 2025, approved by regulators, further bolstered its CET1 ratio to 16.8%, a robust buffer against shocks.

The Q1 results reflect this discipline:
- Operating expenses fell €18 million compared to 2024, with cost-of-income ratio improved to 46%.
- Fee-based income rose 7% to €62 million, driven by retail and asset management.
- Credit impairments dropped 12%, signaling better risk management.

The Mediobanca Bid: A Risky Gambit

MPS’s Q1 resilience emboldened its January 2025 €12 billion hostile bid for Mediobanca, Europe’s largest independent investment bank. The offer—23 MPS shares for every 10 Mediobanca shares—was swiftly rejected as “devoid of rationale” by Mediobanca’s board, which argued the merger would dilute its wealth management and investment banking strengths.

Yet MPS persists, leveraging its improved capital position and shareholder support from investors like the Caltagirone family and Anima Holding. The bid’s success hinges on convincing Mediobanca’s shareholders to accept a deal their board opposes—a high-stakes battle in a sector already roiled by UniCredit’s €10.5 billion acquisition of Banco BPM.

Competing Moves Complicate the Landscape

Mediobanca isn’t sitting idle. It has launched its own €6.3 billion bid for Banca Generali, funded by selling its 13% stake in Assicurazioni Generali. This maneuver aims to create a wealth management powerhouse with €210 billion in assets under management, potentially weakening MPS’s case by reducing Mediobanca’s reliance on its Generali ties.

However, Mediobanca faces internal dissent: two Delfin-appointed directors oppose the Banca Generali bid, highlighting governance clashes that could complicate both deals. Meanwhile, MPS’s own path is fraught with risks:
- Market skepticism: MPS shares have fallen 8.5% since the bid was announced, while Mediobanca’s stock dropped 14%, narrowing the premium MPS offers.
- Analyst doubts: Barclays warns of limited synergies between MPS’s retail focus and Mediobanca’s investment banking, questioning whether the merger will deliver more than €300 million in annual savings.

The Bigger Picture: Italy’s Banking Crossroads

The MPS-Mediobanca clash is part of a broader Italian banking consolidation wave. The Italian government aims to create a “third pillar” alongside UniCredit and Intesa Sanpaolo but faces resistance from politically tied shareholders and regulatory hurdles. MPS’s success here could redefine its role—or leave it vulnerable if the bid fails.

Full-year 2025 forecasts temper the Q1 optimism:
- Net sales are projected to drop 3.8% to €3.88 billion.
- Net income may fall 30% to €1.37 billion, though dividends are rising 244% to €0.86 per share, signaling confidence in long-term stability.

Conclusion: A High-Stakes Roll of the Dice

Monte dei Paschi’s 24% profit rise is a hard-won victory, reflecting its operational discipline. Yet its bid for Mediobanca remains a leap into the unknown. With €145 million in Q1 profit and a 16.8% CET1 ratio, MPS is financially stronger—but the merger’s success depends on overcoming Mediobanca’s resistance, shareholder skepticism, and strategic misalignment.

If MPS prevails, it could carve out a new era of dominance in Italian banking. If it fails, the bank risks diluting its capital and reputation. For now, investors are left to ponder whether this 700-year-old institution has truly turned the corner—or if its ambition outpaces its capacity.

The numbers tell a tale of recovery, but the jury is still out on whether MPS can transform that recovery into lasting power.