Europe’s Big Banking Mergers Are Coming in 2021, BofA Says

The creation of a European banking champion could be among a slew of transformative deals in the sector next year, according to top financial dealmakers at Bank of America Corp.

The region’s banking industry is suddenly abuzz with transactions, driving merger and acquisition volumes up 27% year-on-year to $37 billion since the start of July, data compiled by Bloomberg show. The trend is expected to continue throughout the next 12 months, Giorgio Cocini, co-head of the financial institutions group for Europe, the Middle East and Africa at Bank of America, said in an interview.

“Before 2022 we expect four to six large deals in the space,” he said, and “hopefully a pan-European one.”

Europe’s lenders were slower than their U.S. peers to deal with the fallout of the 2008 financial crisis, with cross-border mergers made difficult by a market fragmented along national lines and banks focused on internal restructurings. But long-awaited consolidation, led by Italy and Spain, is now underway as institutions look to confront weak profitability and stiff competition.

Since the summer, Spain’s CaixaBank SA has announced a 3.8 billion-euro ($4.7 billion) deal for Bankia SA, and Banco Bilbao Vizcaya Argentaria SA signaled its retreat from North America by agreeing to sell its U.S. assets to PNC Financial Services Group Inc. for $11.6 billion.

“Why we’ve seen M&A in banking? It’s the need to reduce costs, build scale and actively reallocate capital to where it achieves the best returns,” said Arif Vohra, who co-heads FIG for EMEA at Bank of America. “Financial institutions are being increasingly proactive in reviewing their businesses and searching out weaknesses in the portfolio.”


Bank Champions

Added to this, politicians and regulators are giving more credence to the belief that European banking champions are needed to help support the region’s economy. Talk of a potential tie-up between Swiss banks Credit Suisse Group AG and UBS Group AG has risen in recent months, while analysts have been speculating about a deal involving France’s BNP Paribas SA and Societe Generale SA.

In Italy, the country’s Finance Ministry is intensifying efforts to sell Banca Monte dei Paschi di Siena SpA to UniCredit SpA and is looking to strike a deal as soon as early 2021, Bloomberg News has reported.

“Ultimately, we see a meaningful business opportunity and dealflow between now and the end of next year,” said Cocini.

It’s not just banking. Insurers, asset managers, exchanges and payments firms are all helping to drive an uptick in financial dealmaking.

This year, Bank of America’s FIG team has advised payment firm Nexi SpA on a 7.8 billion-euro deal with Nets A/S and Euronext NV on its more than 4.3 billion-euro purchase of Italian exchange Borsa Italiana. The bank also worked with the U.K.’s RSA Insurance Group Plc on its 7.2 billion-pound ($9.7 billion) takeover by Canada’s Intact Financial Corp. and Danish insurer Tryg A/S.

“In the near future, we should see more activity on the banking and insurance side because payments have gone through a first meaningful wave of consolidation,” said Cocini. “We expect revenue from strategic activity in FIG to grow significantly, in excess of what we have seen in the last two/three years.”