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- Weekly paper - Banking Consolidation in Lombardy: A Closer Look at Recent M&A Activity - Monica Mendbayar
Weekly paper - Banking Consolidation in Lombardy: A Closer Look at Recent M&A Activity - Monica Mendbayar
SFClub Statale
May 19, 2025
In recent years, the Lombardy region has become the epicenter of Italy’s financial transformation, particularly as the banking sector enters a historic phase of mergers and acquisitions. This trend, marked by strategic movements among the country’s leading financial institutions, reflects a broader effort toward increasing competitiveness, operational efficiency, and market resilience in a rapidly evolving economic landscape. As the financial capital of Italy, Lombardy and particularly Milan has emerged as a crucial point of this consolidation wave, attracting attention from both domestic and international observers.
Consolidation and current strategic M&A activities
A defining event in this transformation is UniCredit’s recent bid to acquire Banco BPM, Italy’s third-largest bank by total assets. In early 2025, UniCredit, led by CEO Andrea Orcel, proposed a €14 billion all-share deal that aims to expand its presence in retail and corporate banking, especially across northern Italy. In late April 2025, Banco BPM formally rejected UniCredit's €13 billion all-share takeover bid. The offer proposed an exchange ratio of 0.175 UniCredit shares for each Banco BPM share, representing a 9% discount to BPM's market price at the time.1 It would mark one of the largest banking mergers in Italy in recent decades, signaling a bold shift in strategy by one of the country’s most prominent institutions. However, Banco BPM is not satisfied with the undervalued offer and non-met conditions they set.
Complicating UniCredit’s path, however, is the involvement of Crédit Agricole. The French banking group already holds a 9.9% stake in Banco BPM and, as of March 2025, has received authorization from the European Central Bank to increase its share to 19.8%.2While Crédit Agricole has publicly stated that it does not intend to pursue full control of Banco BPM, its growing stake introduces potential friction in the deal-making process. The presence of a large foreign stakeholder raises questions about potential counterstrategies, shifts in shareholder sentiment, and even the geopolitical dimensions of cross-border banking consolidation in the European Union.
Simultaneously, another major consolidation move is underway in the region:
BPER Banca's Acquisition of Banca Popolare di Sondrio, a mid-sized bank with deep roots in Lombardy: this €4.3 billion all-share deal aims to increase BPER's market share in Lombardy to 14%, strengthening its presence in this economically vital region.3 The proposed acquisition would add over 400 branches, nearly 900,000 new clients, and more than 4,000 employees to BPER’s operations. With this deal, BPER aims to further solidify its presence in the north and strengthen its ability to compete on a national scale.
Mediobanca's Bid for Banca Generali: Mediobanca has launched a €6.3 billion offer to acquire Banca Generali, seeking to bolster its wealth management operations and assert independence amid Italy’s banking sector consolidation.4
These moves reflect a broader trend of consolidation aimed at enhancing competitiveness and operational efficiency in the region.
Implications of banking consolidation
Nevertheless, the current wave of banking consolidation brings with it important concerns. Chief among them is the impact on employment. As banks merge, overlapping operations and branch networks often lead to restructuring efforts, which can result in job losses and reduced service availability, especially in rural or underserved areas. In regions like Lombardy, where local banks have historically played a significant role in community development, the shift toward centralization might have both economic and cultural implications.
Issues arising:
Market concentration: Fewer, larger banks may reduce competition, potentially leading to higher fees, fewer product options, and less responsive customer service. While consolidation can improve efficiency, it must be carefully regulated to avoid harming consumers and small businesses, many of which rely on relationship-based banking with local branches.
Job Security: Unions like FABI and UILCA have highlighted the potential risk to approximately 102,000 banking jobs nationwide due to overlapping operations and restructuring efforts. Lombardy's banking sector in 2025 is at a crossroads, balancing consolidation efforts with the need to maintain employment, service accessibility, and economic growth.5
These high-profile transactions are part of a broader wave of mergers and acquisitions activity sweeping through Italy. In 2024 alone, the total value of announced deals in the country reached approximately €73 billion, a significant increase compared to previous years.
Despite challenges, Lombardy's economy demonstrates resilience:6
GDP Growth: The region's GDP is expected to grow by 1.1% in 2025, driven by the services sector.
Digital Transformation: Banks are investing in digital technologies to enhance customer experience and operational efficiency, aligning with broader trends in the financial sector.7 The region's strategic importance and proactive adaptation to digital trends position it as a key player in shaping the future of banking in Italy.
Regulatory concerns
Regulators are therefore under increasing pressure to balance economic growth with fair competition and social equity. The Italian government’s interventionist stance via its golden powers reflects this challenge. At the same time, shareholder decisions, particularly among institutional investors, will be critical in determining the outcome of these bids. In both the UniCredit-BPM and BPER-Sondrio cases, the fate of the deals may rest on investor confidence in the strategic vision presented by the acquiring banks versus the standalone potential of the target institutions.
The Italian government's intervention added another layer of complexity. Invoking "golden power" rules, imposed conditions on the merger, including UniCredit's complete withdrawal from Russia within nine months and maintaining Banco BPM's loan-to-deposit ratio in southern Italy for five years. These stipulations aimed to safeguard national interests but also introduced uncertainties regarding the feasibility and desirability of the merger. From a regulatory standpoint, the Italian government has shown active interest in overseeing developments through its special legislative tools that allow it to intervene in takeovers of strategic national assets. Government officials have signaled that while the UniCredit-BPM transaction is likely to be approved, certain conditions may be imposed to ensure continued employment, branch accessibility, and support for Italian small and medium-sized enterprises. This reflects a broader concern over maintaining the public interest, particularly in sectors as critical as banking, where shifts in ownership and control can have deep economic and social impacts.
Shareholder Alignment
The proposed merger between UniCredit and Banco BPM brings significant challenges in terms of shareholder alignment. Banco BPM’s board has voiced strong concerns that the offer does not fairly reflect the bank’s value. Specifically, they argue that the proposed exchange ratio would leave Banco BPM shareholders with a disproportionately small stake in the combined entity, despite their expected contribution to future earnings.8
Further complicating the issue is the all-share nature of UniCredit’s offer, which introduces potential tax consequences and dilution risks for existing shareholders. These financial implications have raised alarms among BPM’s investor base, making alignment around the deal more difficult to achieve.
Banco BPM’s leadership has emphasized its strong standalone strategy as a viable alternative, including ambitious financial targets such as €2.15 billion in net income and €6 billion in shareholder remuneration by 2027. This forward-looking plan is designed to reassure shareholders of the bank’s ability to deliver superior returns independently.
From UniCredit’s perspective, however, the merger represents a long-term strategic consolidation opportunity that could generate operational synergies and enhance competitiveness in Italy’s banking sector. Despite this vision, the failure to meet several key preconditions in the offer has further strained alignment between the two banks' stakeholders.
Strategic initiative
Banco BPM has launched an assertive strategic initiative aimed at reinforcing its position as an independent institution in the face of UniCredit’s takeover bid. Central to this plan is a new 2025–2027 business strategy that targets doubling shareholder returns to more than €1.5 billion by 2027 through increased profitability, digital transformation, and regional market expansion. As part of this strategy, Banco BPM is also acquiring full control of Anima Holding, a major Italian asset management firm, in a €1.5 billion deal intended to boost fee income and create cross-selling synergies. The bank has emphasized its commitment to regional roots, maintaining jobs, and supporting small and medium-sized enterprises, especially in northern Italy. These moves collectively highlight BPM’s intention to remain a competitive, independent force in the evolving Italian banking landscape.9
However, Banca Popolare di Sondrio has not passively accepted the offer. In response, the bank announced an ambitious business plan for the period between 2025 and 2027, aimed at doubling shareholder returns to €1.5 billion over three years. This strategic move is clearly intended to persuade investors of its long-term viability as an independent institution and to counter the appeal of BPER’s proposal. Whether this strategy will succeed remains to be seen, as shareholders and regulatory authorities continue to weigh the pros and cons of integration versus independence.10
Analysts suggest that this consolidation trend is driven by a combination of factors, including persistent low interest rates, rising regulatory costs, the need for digital investment, and European-level incentives to streamline the financial sector. In this context, scale has become critical: larger institutions are better positioned to absorb costs, offer diverse financial products, and invest in modernizing their services.
Conclusion
Key-takeaways from current deals
Adequate Premiums Are crucial: Offering a minimal or no premium over market value can signal undervaluation, leading to rejection by the target company's board and shareholders.
Strategic Initiatives should be valued: Acquirers should consider and appropriately value the target company's ongoing and planned strategic initiatives to present a compelling offer.
Shareholder Interests should be aligned: Ensuring that the merger benefits are equitably distributed among shareholders is vital to gain their support.
Regulatory Landscape should be overlooked: Understanding and navigating the regulatory environment is essential, as government interventions can significantly impact the outcome of M&A activities.
Lombardy’s position as Italy’s financial hub has placed it at the center of a transformative wave of mergers and acquisitions, reshaping the nation’s banking landscape. The flurry of strategic deals from UniCredit’s contested bid for Banco BPM to BPER’s push to acquire Banca Popolare di Sondrio and Mediobanca’s move on Banca Generali illustrates a sector-wide push for greater scale, efficiency, and competitiveness amid evolving economic conditions. However, this consolidation trend is not without its complications. Resistance from target institutions, regulatory scrutiny under Italy’s “golden power” framework, and concerns about market concentration, job security, and shareholder alignment have all emerged as critical balancing points. Institutions like Banco BPM and Banca Popolare di Sondrio are pushing back with ambitious standalone strategies to maintain independence, underscoring the dynamic tension between integration and self-determination. Despite these challenges, Lombardy’s banking sector continues to demonstrate resilience through steady GDP growth, digital investment, and strategic positioning. The outcome of these high-stakes moves will not only determine the future structure of Italian banking but will also serve as a bellwether for broader European financial consolidation.
These trends offer a fascinating window into the mechanics of corporate strategy, regulatory economics, and institutional behavior. Whether these deals succeed or not, they will leave a lasting impact on the structure and culture of banking in one of Europe’s most dynamic economic regions.
Bibliography
Credits
Author: Monica Mendbayar - Editorial Area Associate
Editor: Alessandro Liberati - Editorial Area Manager
Graphics and layout: Simone Triozzi - Communication Manager