Eurobank M&A: Supportive To Small(er) Bank Spreads

BBG story this morning reprising M&A in European banks: little new in here but we'd make two points which, at least in part, underpin relative spreads for some smaller European banks, in our view:

• Firstly, BBG is reticent about mentioning potential targets: we’d note BCP’s situation with Fosun “open to selling” its 20% stake (and Sonangol, hardly a synergistic shareholder, owns another 20%). Its recent results (16-May) did show a mid-teens RoTE for 1Q24 and trades at just 0.7-0.8x tangible book. Further, there are a range of smaller Italian banks (BMPS, BAMI, BPER, BP Sondrio?) at varying levels of target status.
• Secondly, recovering equity prices in this sector (SX7P is up 34% in the last year, broader Euro equity index, SXXP, +12%) have given a range of governments opportunities to sell down stakes in previously-rescued banks (UK, Italy) which does leave the playing field less politically-charged now, we feel. France’s President Macron appears only to deals (per BBG article) but we have also seen Spanish politicians rally to Sabadell’s defence.