UniCredit's Banco BPM Bid Hangs in the Balance: A Dance of Power and Profit

The Italian banking sector is bracing for a pivotal decision as UniCredit weighs whether to withdraw its bid for Banco BPM, a move that could reshape the European financial landscape. With Economy Minister Giancarlo Giorgetti’s cryptic remark—“They do as they please”—echoing through boardrooms and trading floors, the saga underscores a clash between national interests and corporate strategy.

The Government’s Golden Power: A Double-Edged Sword

The Italian government has wielded its “golden power”—a tool to block mergers threatening national interests—to impose stringent conditions on UniCredit’s bid. Key demands include:
- Cessation of Russian operations within nine months, despite Russian laws requiring presidential and central bank approvals.
- Maintenance of investments in Anima Holding, a fund manager owned by Banco BPM, with a mandate to support its growth.
- A five-year freeze on reducing Banco BPM’s loan-to-deposit ratio, which currently sits at 115%, well above UniCredit’s 85%.

These terms aim to prevent Banco BPM’s savings from indirectly benefiting the Russian economy—a “slight risk” the government seeks to eliminate. However, UniCredit argues the conditions could lead to regulatory fines and impede its ability to make “sound decisions,” as stated in its formal response to regulators.

UniCredit’s Dilemma: Strategy vs. Compliance

UniCredit CEO Andrea Orcel has long insisted the bid is “hostile” only to shareholders, not to Banco BPM itself. Yet, compliance costs and the five-year restriction on adjusting the loan-to-deposit ratio—critical to optimizing profitability—are now framing the deal as a potential “dealbreaker.” Orcel’s team has repeatedly emphasized that if the bid fails to meet internal financial metrics, withdrawal remains on the table.

The tender period for Banco BPM shares opens on April 28, 2025, with a deadline of June 23. Analysts speculate that UniCredit’s board could finalize its stance within weeks, particularly as Orcel explores alternatives like Commerzbank and Generali—though both face regulatory hurdles of their own.

Market Sentiment: Skepticism, but a Premium Remains
Banco BPM’s shares fell 2.5% in early April 2025 on fears of a withdrawal, yet they still trade €1.1 billion above UniCredit’s offer of €1.5 billion. This premium suggests investors believe the bid’s success hinges on UniCredit’s resolve to navigate the government’s terms—or find a compromise.

The Broader Implications

UniCredit’s decision will test Italy’s approach to corporate governance. By invoking “golden power,” the government has prioritized national security over market efficiency, a stance that could deter future foreign investments. For UniCredit, walking away would mark a rare retreat for a bank that has aggressively expanded across Europe.

Conclusion: A High-Stakes Gamble with No Clear Winner

The Banco BPM bid’s fate rests on three critical factors:
1. UniCredit’s Board Approval: A withdrawal would erase years of strategic planning but avoid regulatory entanglement. Remaining in the deal could unlock synergies worth €2 billion annually by 2028, per UniCredit’s estimates.
2. Government Flexibility: Will Rome relax the Russian operations clause, or will it stand firm? A compromise on the loan-to-deposit ratio could tip the balance.
3. Market Dynamics: Banco BPM’s stock remains above the bid price, indicating investor skepticism—but also leaving room for UniCredit to revise its offer.

With the tender deadline looming, the stakes are clear: UniCredit risks losing credibility if it walks away, while proceeding could saddle it with costly constraints. For investors, the choice is between betting on Orcel’s strategic vision or hedging against regulatory overreach. As Giorgetti’s words linger, one truth is certain: in this dance of power and profit, no step is guaranteed.