Italy looks like fertile ground for a mega merger deal in banking

cnbc.com:

MILAN, Italy — European policymakers have longed for bigger banks across the continent.

And Italy might be about to give them their wish with a bumper round of M&A, according to analysts.

Years after a sovereign debt crisis in the region and a government rescue for Banca Monte dei Paschi (BMPS) that saved it from collapse, many are looking at Italy's banking sector with fresh eyes.

«If you assess individual banks in Italy, it's difficult not to believe that something will happen, I would say, over the next 12 months or so,» Antonio Reale, co-head of European banks at Bank of America, told CNBC.

Reale highlighted that BMPS had been rehabilitated and needed re-privatization, he also said UniCredit is now sitting on a «relatively large stack of excess of capital,» and more broadly that the Italian government has a new industrial agenda.

UniCredit, in particular, continues to surprise markets with some stellar quarterly profit beats. It earned 8.6 billion euros last year (up 54% year-on-year), pleasing investors via share buybacks and dividends.

Meanwhile, BMPS, which was saved in 2017 for 4 billion euros, has to eventually be out back into private hands under an agreement with European regulators and the Italian government. Speaking in March, Italy's Economy Minister Giancarlo Giorgetti said «there is a specific commitment» with the European Commission on the divestment of the government stake on BMPS.

«In general, we see room for consolidation in markets such as Italy, Spain and Germany,» Nicola De Caro, senior vice president at Morningstar, told CNBC via email, adding that «domestic consolidation is more likely than European cross-border mergers due to some structural impediments.»

He added that despite recent