A Strategic Stake Battle: Credit Agricole's Move on Banco BPM and Its Implications for Investors

Credit Agricole's recent push to increase its stake in Banco BPM to just over 20% marks a critical turning point in the ongoing rivalry with UniCredit over control of the Italian lender. This move, driven by accounting pragmatism and strategic ambition, underscores the French bank's long-term commitment to blocking UniCredit's hostile takeover bid while avoiding regulatory triggers that could force a full tender offer. For investors, the stakes are high: the outcome could reshape Italy's banking sector, influence Banco BPM's valuation, and test the resilience of Credit Agricole's capital position.

The Accounting Catalyst and Strategic Play

Credit Agricole's current 19.8% stake in Banco BPM is poised to cross the 20% threshold, a symbolic line that shifts the accounting treatment of the investment to the “equity method.” This change allows the French bank to reflect its proportional share of Banco BPM's earnings in its income statement, smoothing out volatility from market-driven swings in Banco BPM's stock price. While purely a financial maneuver, the strategic implications are profound: by avoiding the 30% tender offer threshold, Credit Agricole retains flexibility to build its holding up to 29% without triggering mandatory bids.

The move also signals Credit Agricole's resolve to cement its position as Banco BPM's largest shareholder. The two banks share joint ventures in consumer credit and non-life insurance, and Credit Agricole's asset manager, Amundi, relies on UniCredit's sales channels in Italy. This interdependence complicates UniCredit's takeover ambitions, as a successful bid could disrupt these synergies.

UniCredit's Stalled Bid: A Regulatory Quagmire

UniCredit's unsolicited offer for Banco BPM has been stymied by Italy's use of “golden power,” which imposed conditions to divest Russian operations and maintain lending ratios. The Lazio Regional Administrative Court's July ruling partially invalidated these terms but upheld the requirement to exit Russia within nine months—a hurdle UniCredit calls “unworkable” due to frozen assets and geopolitical barriers. With the offer set to expire on July 23, the clock is ticking.

The court's decision leaves UniCredit with three unappealing options: proceed with the deal despite the Russian exit risks, abandon the bid and accept a write-off of its stake-building costs, or seek a revised agreement. Banco BPM's shareholders, meanwhile, face uncertainty: accepting UniCredit's offer now carries heightened risk of regulatory delays, while rejecting it could leave the bank exposed to a prolonged governance battle.

Risks and Rewards for Investors

Banco BPM's valuation dynamics: Credit Agricole's stake increase has already buoyed Banco BPM's stock, reflecting market confidence in the French bank's long-term partnership. However, a failure to resolve UniCredit's bid could lead to prolonged volatility. Investors should monitor Banco BPM's trading multiple relative to peers—its current 0.8x price-to-book ratio remains below the sector average, suggesting upside if the stake battle resolves positively.

Credit Agricole's capital position: The stake hike will reduce Credit Agricole's CET1 ratio by 20 basis points to ~12.5%, a level still above regulatory minimums. Yet, further stake-building beyond 20% could strain capital reserves. Investors in Credit Agricole should track its quarterly stress-test results and any ECB guidance on equity method investments.

UniCredit's operational risks: The Russian exit requirement threatens UniCredit's profitability. Its German unit's €580 million gas project liabilities and disputes like the €462.6 million RusChemAlliance case could force writedowns, eroding capital buffers. UniCredit's shares remain vulnerable to these risks, even if the bank proceeds with the Banco BPM bid.

Investment Strategy: Positioning for Regulatory Outcomes

1. Banco BPM: Investors seeking asymmetric upside should consider a long position in Banco BPM, particularly if UniCredit withdraws its bid. The stock's valuation discount and Credit Agricole's stabilizing influence support a price target of €4.50–€5.00 (vs. current €3.80).
2. Credit Agricole: While the stake increase is credit-positive, the CET1 dip merits caution. Investors should await clarity on the ECB's approval and Banco BPM's earnings trajectory before committing.
3. UniCredit: Avoid near-term exposure unless the Russian exit can be resolved swiftly. A short position could profit if the July 23 deadline passes without resolution, but geopolitical risks complicate this play.

Conclusion

Credit Agricole's strategic stake-building in Banco BPM exemplifies the evolving playbook in European banking: alliances over acquisitions, regulatory agility over control. For investors, the next few weeks will be pivotal. A failed UniCredit bid could cement Credit Agricole's influence and unlock Banco BPM's valuation, while a forced Russian exit could derail UniCredit's broader restructuring. Monitor regulatory developments and capital metrics closely—the stakes are high, but the rewards for the informed investor could be substantial.