The first four stocks in the Milan index this morning belong to the banking sector: behind Unicredit +2,09% (year to date +42%) run Banco Bpm +1,51%, Intesa Sanpaolo +1,24% and Mediobanca. In short, the rebound in the world of credit is not made up of risk alone, the most effervescent in a weak scenario, held back by the indications of rate hikes emerging from the Fed meeting. On the contrary, the albeit cautious signs of tension on the cost front of money translated into an upward incentive also for the banks of the Old Continent, up by 2,2% against a very favorable scenario. Even in Europe, in fact, the authorities are raising their estimates of economic growth, nothing more than a rebound, as noted by Minister Daniele Franco, but still positive after horrible years alleviated only by state refreshments.
Admittedly, the interest rate landscape is quite different on this side of the Atlantic. The ECB was quick to tone down expectations of rate hikes in Europe at the mouth of its chief economist Philip Lane. Mario Draghi's favorite dove. It is still premature and unnecessary to discuss the end of the ECB's emergency bond-buying programme, he said, adding that there is still a lot of data to go before the important meeting in September. Speaking to Bloomberg TV, Lane explained that the ECB does not have a fixed volume approach to purchases under the €1,85 trillion PEPP programme.
But several factors argue in favor of a rally. First, the prospect of the European Central Bank giving the green light, on 23 July next, to the distribution of dividends and purchases of treasury shares (buyback) if the parameters of capital solidity are respected, a credible circumstance in a climate of general recovery for the economy. Secondly, after difficult years, the European banking sector is trading at low values with an average P/E of 21x and an average Dividend/Yield of 1,70% (before any future ECB decision on dividends). In Italy, in particular, the share prices of institutions remain below book value: Intesa Sanpaolo and Mediobanca are worth approximately 0,8 times the net worth, Unicredit, Banco Bpm and Bper do not go beyond 0,4 times the book value.
The third upside factor is related to next wave of M&A, in practice inevitable after the takeover bid by Intesa on Ubi and by Crédit Agricole on Creval. In fact, analysts agree: mergers are essential to survive in an extremely competitive environment, where the big names can invest colossal sums (11 billion dollars for JP Morgan alone) in technology. In this context, pressure on the weakest institutions, from MPS and Carige to the world of BCCs and limited-sized institutions, is likely to increase.
For months, analysts have been studying all the potential operations. Kepler Cheuvreux, for example, hypothesizes eleven possible combinations, among which, the agreements deemed capable of increasing value would be those between Banco Bpm and Bper on the one hand and Unicredit-Mps on the other, with the possible inclusion of Carige. But before the big race starts, several stages will have to be overcome: the end of the moratoriums (currently scheduled for the end of June), the stress tests conducted by the EBA expected by July (and involving Unicredit, Intesa Sanpaolo, Banco Bpm and Mps) and corporate breakthroughs, such as the transformation of Pop. Sondrio in Spa which could coincide with the lunge of the Unipol group interested in strengthening Bper before the wedding with Bpm.
Bancassurance, moreover, appears together with managed as one of the winning drivers in this phase of the market, however marked by low (or negative) interest rates and the interest margin under pressure. For this reason the stable and rich commissions (perhaps too much) arriving from customers who are more liquid than ever are appreciated: hence the success of managed savings, a world characterized by strong economies of scale and high fixed costs, ideal for creating synergies in merger operations.
So pay attention to Anima (19,4% owned by Bpm bank and 10% by Poste Italiane) e Ark sgr (57% controlled by Bper and 34% owned by Pop. Sondrio). But also to FinecoBank, which, after the exit of Unicredit, has become a fully contestable public company.
