by Luca Ruggeri

On CONSOB (Italian stock exchange regulator)'s website a disclosure appeared on August 10 of JP Morgan's stake (built through derivative instruments) in Banco BPM for a share of about 5.1 percent in the Italian bank's capital.

Banco BPM: a much sought-after prey

Why is the news interesting? Banco BPM is Italy's third-largest listed banking group in terms of total assets, net loans to customers, direct and indirect deposits, and number of branches; thus, it is a major player in the Italian banking scene.

Banco BPM is generally considered a prey in the context of the expected further reorganization of Italy's banking system, both because it is active in the most profitable part of the country and especially because of its very fragmented shareholding structure. Indeed, the leading shareholder, according to Consob data, is the French group Credit Agricole with 9.178 percent followed by Capital Research and management company with 4.988 percent. The remaining shareholders are of very little relevance, as none of them exceeds 3 percent, although a consultation agreement has been signed between Inarcassa, ENPAM Foundation and other foundations of banking origin (which, however, covers only 6.17 percent of the capital).

The Credit Agricole takeover and JP Morgan's role.

In this situation, JP Morgan's positioning is of particular significance, especially considering that JP Morgan has already acted as advisor to Credit Agricole in Italy, especially in the takeover bid that implied the acquisition of Credito Valtellinese by Credit Agricole itself in 2020. This is, moreover, the latest of several incorporations of Italian banks by the French bank, which press rumors believed was also interested in Anima, one of Italy's leading asset management companies.

The relative majority takeover in BPM by Credit Agricole has a recent origin that needs to be further investigated. In February 2022, the daily newspaper "Il Messaggero" informed that Unicredit was planning to buy out BPM, probably over the following weekend, based on "rumors, from government sources also credited by financial sources"; the news entailed a jump in the value of BPM shares that "burned" the transaction designed by Unicredit.

Then, in April 2022, Credit Agricole announced that it has acquired a 9.18 percent stake in BPM, becoming its largest shareholder - a surprise move that stunned the market and was justified by the Italian bank's strong fundamentals and existing joint venture in consumer credit. In addition, Credit Agricole recently made a bancassurance proposal to BPM in competition with France's AXA.

Recovery Fund e MES "senza condizioni": tutto oro quel che luccica?

Credit Agricole, at the time of the BPM share purchase, pointed out that it had not exceeded the 10 percent threshold; a statement of little relevance given that such a breach can be requested at any time from CONSOB and, indeed, compliance with it prevented the French bank from an in-depth examination with the regulator about the strategy underlying the acquisition.

Is the Creval scheme being replicated?

The cue for this article - JP Morgan's crossing of the 5 percent threshold - as claimed by an influential financial newspaper is due to fluctuations in the value of financial instruments, but this does not explain anything about JP Morgan's motives for choosing what can hardly be construed as mere investment.

Indeed, Credit Agricole's significant shareholding stakes a serious claim on BPM's future as one of Italy's leading banks. Given that as of now Credit Agricole is the largest shareholder and, with JP Morgan's stake, would become by far the largest shareholder, at that point it would be easy to wait for the right moment, perhaps in the face of a decrease in share value, to increase its stake by replicating the scheme already put in place with Credito Valtellinese that ended with the incorporation of Creval itself.

CONSOB, in the interest of the market but also of Italy, should turn a spotlight on the affair; but it would be desirable if the government, perhaps "distracted" by the search for a solution for Monte Paschi, would also carefully assess the situation.

Senior Fellow at the Centro Studi Machiavelli. A graduate in Economics, he worked for over twenty years at a large Italian bank and currently serves as a general manager at an institutional investor.