Italian press carrying a story about Unipol Sai (UNIIM: Ba1 pos/BBB pos) raising its stake in BPER (BPEIM: NR/BBB- pos/BBB-) and seeing this as increasing the potential for Italian bank consolidation, specifically aiming at BMPS (MONTE: Ba2/BB). MPS’s senior unsecured curve has performed well this year but less well than SABSM since it received a bid. This appears a positive underpinning for MONTE spreads, we feel.

• Unipol Sai has been an investor in, and industrial partner of, BPER for years and started building its strategic stake in 2018, starting at 3.25%. Il Sole 24 Ore is reporting that the recent purchase of another 4.77% (bringing the holding to 24.62%) is part of a strategy to back a bid for MONTE and being diluted too much in the event of such a bid.
• Irrespective of the logic of buying equity before a potentially dilutive bid, this does highlight that European bank M&A is moving now (BBVA-SAB, Nationwide-Virgin Money etc) and that Italian bank consolidation appears likely to be a key part of that.
• Sabadell (SABSM: BBB-/BBB) spreads are over 20bp tighter since the week before BBVA launched its bid (20bp better than the €IG banks index) highlighting the impact a bid from a larger entity can have. MONTE spreads are 57bp tighter YTD, only around 10bp better than the index, highlighting there could still be more tightening to come.