Italy's Banco BPM makes first move in new insurance strategy - Financial Post

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MILAN — Banco BPM is to acquire full ownership of its life insurance partnership with France’s Covea, in a move that may lead the Italian bank to strengthen commercial ties with its new top investor Credit Agricole.

French bank Credit Agricole last week bought a 9.2% stake in Italy’s No.3 bank, and said the investment aimed to broaden the scope of their strategic partnerships – currently centered on consumer finance.

Banco BPM said it expected to spend 310 million euros ($337 million) to buy the 81% stake in the Bipiemme Vita life insurance partnership held by French partner Covea.

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Bipiemme Vita in turns controls in full non-life joint venture Bipiemme Assicurazioni.

After the closing, Banco BPM will receive 120 million euros from the insurance unit as a special dividend, it said.

Banco BPM had said it would bring insurance in house to drive fee income under a standalone strategy by CEO Giuseppe Castagna, following fruitless attempts to strike a merger with a same-size peer.

Castagna had brought forward to 2022 from end-2023 the option to end the Covea partnership.

He has secured an option to exit early, from Jan. 1 2023, another insurance joint-venture Banco BPM has with Cattolica, which is now part of insurer Generali.

POTENTIAL PARTNERS

Banco BPM’s insurance strategy has drawn interest from potential new partners, bankers say. The bankers said Credit Agricole, which is a major insurance and asset management player, probably moved on Banco BPM to thwart rivals – with AXA also keen to expand its distribution in Italy.

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Both Credit Agricole and AXA declined to comment.

While Banco BPM’s plan envisages running its insurance operations alone, it may consider other options including a sale of a stake in the business to a new partner once it has full ownership, two people familiar with the matter said.

A person familiar with Credit Agricole’s thinking has said the rationale of its investment in Banco BPM is to expand business lines in its biggest market outside France.

If Banco BPM launches a competitive process for a new insurance partner Credit Agricole could be in the running, the two people said.

However, after Russia’s invasion of Ukraine derailed bigger rival UniCredit’s takeover plans for Banco BPM earlier this year, Credit Agricole’s move has also stoked speculation of a full acquisition.

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Following a gradual stakebuilding since 2018, Credit Agricole last year took over small Italian bank Creval, reaching some 90 billion euros in assets in the country.

The French bank has said it has not requested regulatory approval to cross the 10% threshold in Banco BPM and the person familiar with its thinking said there were no plans to do so.

Banco BPM said it would seek regulatory approval for the beneficial treatment of banks’ stakes in insurers, known as the “Danish compromise,” adding 5 basis points to its core capital ratio.

($1 = 0.9193 euros) (Additional reporting by Valentina Za; Editing by David Evans and Jane Merriman)

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