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Banco BPM: Italy's Third Banking Giant & The Fight for Independence
I. Introduction: When Consolidation Becomes a Political Battlefield
On November 25, 2024, Andrea Orcel walked into UniCredit's gleaming Milan headquarters and authorized what would become one of the most contentious banking battles in modern European history. UniCredit SpA made an unsolicited €10 billion ($10.5 billion) bid for domestic rival Banco BPM SpA as Chief Executive Officer Andrea Orcel's ambitions to buy Germany's Commerzbank AG faced local opposition and delays.
The larger lender announced that it would offer 0.175 of its own shares for each share in Banco BPM, valuing the stock at 6.657 euros a piece. The all-stock offer proposed a 0.5% premium on the closing price of Banco BPM shares recorded on Friday. In banking M&A terms, offering virtually no premium is either supreme confidence or supreme arrogance—and the Italian government decided it was the latter.
What followed was eight months of corporate warfare, political intervention, and a high-stakes clash between European banking consolidation ambitions and national sovereignty. UniCredit SpA dropped its bid for rival Banco BPM SpA, ending an eight-month standoff with its rival and the Italian government over the plan to create the country's largest lender.
But to understand why this battle mattered—and why Banco BPM remains at the center of Italy's banking future—requires tracing the remarkable story of how two 150-year-old cooperative banks merged at the worst possible moment and emerged as a takeover target worth more than €15 billion.
Banco BPM ranks as the 4th largest bank in Italy by total assets. In 2023 its total assets were €184.16 billion, representing a 6.04% market share. The bank is the third largest retail and corporate banking conglomerate in Italy (in terms of total assets in 2016), behind Intesa Sanpaolo and UniCredit.
The central question is deceptively simple: How did two struggling cooperative lenders, born in the 1860s to serve artisans and small businessmen, transform into a modern banking powerhouse that both Italy's government and Europe's dealmakers consider essential to the continent's financial future?
II. The Cooperative Banking Model: Italy's "Banche Popolari"
A Venetian Visionary and the Birth of Italian Cooperative Banking
In the spring of 1865, a young Jewish economist named Luigi Luzzatti stood before a gathering of Milanese merchants with a revolutionary proposition. Luzzatti was born to Jewish parents in Venice on 11 March 1841. After completing his studies in law at the University of Padua, he attracted the attention of the Austrian police by his lectures on political economy, and was obliged to emigrate after starting a mutual aid society among gondoliers.
Luzzatti had studied the cooperative credit associations developed by Hermann Schulze-Delitzsch in Germany and believed they could transform Italy's nascent post-unification economy. Gifted with eloquence and energy, he popularized the economic ideas of Franz Hermann Schulze-Delitzsch in Italy, worked for the establishment of a commercial college at Venice, and contributed to the spread of people's banks on a basis of limited liability throughout the country. In 1865 he founded the Banca Popolare di Milano in Milan, the second cooperative bank in Italy (the first one was the Banca Popolare di Lodi).
Banca Popolare di Milano (BPM) was founded on 12 December 1865 in Milan as Italy's second cooperative bank, following the model of Banca Popolare di Lodi, with the aim of providing credit access to artisans, merchants, and small savers amid post-unification economic challenges. Initiated by Luigi Luzzatti, a prominent economist and later Italian Treasury Minister, BPM operated under a mutual structure where shareholders had one vote regardless of shareholding size, fostering local community ties in Lombardy.
Luzzatti would go on to become Italy's Prime Minister from 1910 to 1911, and after becoming Treasury Minister in 1896, he is credited to have saved Italy from bankruptcy. But his most enduring legacy was the cooperative banking model that would shape Italian finance for the next 150 years.
The Cooperative Governance Structure: Strength and Achilles' Heel
The model Luzzatti imported had a distinctive characteristic that would prove both its greatest strength and ultimate undoing: one shareholder, one vote. Banca Popolare di Milano encountered governance deficiencies under its cooperative structure, characterized by a one-share-one-vote cap that limited professional investors' influence and contributed to inadequate risk oversight, prompting European Central Bank intervention. In October 2015, shareholders approved conversion to a joint-stock company (S.p.A.) by over 80% majority.
This democratic approach created deep local relationships and community trust. For 150 years, the banche popolari served as the financial backbone of Northern Italy's small and medium enterprises. The bank operates primarily in northern Italy, with a strong presence in Lombardy and Veneto.
But the one-vote system also created perverse incentives. No institutional investor could accumulate meaningful influence, which meant management faced little external pressure. The reform aims at fixing an anomaly of the Italian system, which contributed to make listed cooperatives "hybrid" institutions, halfway from big universal banks, focused on making profit, and mutual entities, focused on supporting local communities. Indeed European cooperative banks outperformed the traditional big banks during the financial crisis, but the Italian anomaly does not reside in the cooperative status of the "popular banks", but in the fact that they are listed on the stock exchange. None of the more than 1,000 German registered cooperative banks is listed, and no other major European listed bank adopts the "per person" voting mechanism.
Meanwhile, Banco Popolare traced parallel roots. Banco Popolare traces its origins back to 1867, while Banca Popolare di Milano was founded in 1865. Banco Popolare and BPM themselves were both originated as Popular Banks (Italian: banca popolari), a kind of co-operative bank in Italy, based in cities such as Bergamo, Verona, Modena, Novara and Lodi (Banco Popolare) and Milan, Rome (BPM) respectively.
The Expansion Era
BPM has grown considerably since the 1950s by buying interests in other banks such as Banca Popolare di Roma (1924–1957), la Banca Briantea, Banca Agricola Milanese, Banca Popolare Cooperativa Vogherese, Banca Popolare di Bologna e Ferrara, Banca Popolare di Apricena, INA Banca, Cassa di Risparmio di Alessandria, Banca di Legnano and Banca Popolare di Mantova. The pattern was acquisition-driven growth, cementing regional dominance through consolidation of smaller cooperative banks.
In 1999 Banca Popolare di Milano opened an online banking service called WeBank. This early move into digital banking would prove prescient, though the cooperative governance structure would ultimately prevent the banks from adapting quickly enough to the post-2008 world.
For investors, the cooperative model created a strange paradox: listed banks with public shareholders that operated more like mutual societies than profit-maximizing enterprises. This anomaly would become unsustainable.
III. Banco Popolare's Consolidation Wave (2002-2015)
Building an Empire Through Merger
While BPM consolidated in Lombardy, Banco Popolare pursued an even more aggressive acquisition strategy that would ultimately create a sprawling network across Northern Italy.
Banco Popolare di Verona e Novara, Società Cooperativa a responsabilità limitata was formed in 2002 by the merger of Banco Popolare di Verona – S.Geminiano e S.Prospero and Banca Popolare di Novara.
Then came the transformational 2007 deal. Banco Popolare Società Cooperativa was formed by the merger of Banco Popolare di Verona e Novara (BPVN) and Banca Popolare Italiana (BPI). After the deal a new holding company was formed, with Banco Popolare di Verona – S.Geminiano e S.Prospero, Banca Popolare di Novara, Banca Popolare di Lodi, Credito Bergamasco and Cassa di Risparmio di Lucca Pisa Livorno were the main subsidiaries.
64% of the shareholders of the new bank were former shareholders of BPVN, with the rest being the former holders of BPI.
The 2008 Crisis Hits Early
Banco Popolare would become the first Italian bank to directly taste the bitterness of the global financial crisis. In June 2009, the company became the first Italian bank to receive state aid from the Government of Italy due to the 2008 financial crisis. It sold €1.5 billion in convertible bonds to the state.
This was a defining moment. While Italian banks had largely avoided the subprime exposure that devastated American and European competitors, the broader economic contraction would prove devastating for institutions whose loan books were concentrated in small and medium enterprises.
Banco Popolare SocietĂ Cooperativa is an Italian cooperative bank. In June 2009 the company became the first Italian bank to receive state aid from the Government of Italy due to the ongoing financial crisis.
Streamlining the Empire
The post-crisis years brought painful restructuring. On 1 January 2011 the group sold Banca Caripe to Banca Tercas, the bank only section in Abruzzo. In the same year most of the subsidiaries were absorbed into the parent companies, but remained as a brand and as internal bank divisions and departments. The incorporation of Credito Bergamasco was completed in 2014.
In 2015 Banca Italease was absorbed. It became the leasing division of the bank.
The consolidation created a sprawling network, but also masked growing problems in asset quality that would explode into full view as the sovereign debt crisis cascaded through Italy's economy.
IV. The Italian Banking Crisis & Regulatory Earthquake (2014-2016)
The NPL Problem: A €360 Billion Albatross
To understand why Banco BPM exists at all—why two proud cooperative banks with 150 years of independent history agreed to merge—requires confronting the brutal reality of Italy's banking crisis.
In Italy, the share of NPLs in total loans has increased from six percent at the end of 2008 to 18 percent now, totalling more than EUR 300 billion.
The NPL problem at Italy's banks is largely the result of the prolonged recession that has hit the Italian economy in recent years and of lengthy credit recovery procedures. The double-dip recession that struck Italy between 2008 and 2014 severely impaired Italian banks' balance sheets and loan quality.
The numbers were staggering. According to the IMF (and based on data made available by the Bank of Italy), the ratio of NPLs to total loans in Italy has stretched to unprecedented levels following to the financial crisis: "total NPLs appear to have broadly stabilized at about €356 billion at end-June 2016 (about 18 percent of total loans; 20 percent of GDP; and one-third of the Euro Area total)."
Italian banks have been very resilient to the first wave of financial crisis in 2008, due to their low exposure to US subprime products and to the fact that Italy did not have a pre-crisis housing bubble. However, when the global financial crisis turned into a euro sovereign banking crisis in 2010, things started to deteriorate for the sector. Italian banks were among the worst performers in the 2014 ECB/EBA comprehensive assessment of banks balance sheets.
Banca Monte dei Paschi di Siena, Banca Carige, Banca Popolare di Vicenza and Banca Popolare di Milano were found in need to raise respectively 2.1bn, 0.81bn, 0.22bn and 0.17bn, for a total of 3.31bn.
The 2015 Cooperative Bank Reform: The End of an Era
The Italian government recognized that the cooperative model had become an obstacle to the recapitalization these banks desperately needed. On January 24, 2015, they moved decisively.
Italian Law N°3/2015 required all Popular Banks (Banca Popolare) with total assets above €8 billion, to transform into società per azioni (company limited by shares).
As a result of this change, cooperative banks will be organised along the same lines as commercial banks, and this will smooth the way to takeovers by international financial groups.
The government is taking steps to encourage the consolidation process to continue over the next several years to boost the international competitiveness of the Italian banking sector. For instance, a 2015 reform required Italy's 10 largest cooperative banks (banche popolari) to convert to joint-stock companies within 18 months to make the converted banks more attractive targets for foreign purchasers seeking to enter the Italian market.
Italy's Decree-Law 3/2015, enacted on 24 January 2015, mandated that banche popolari with total assets exceeding €8 billion convert to joint-stock companies. This legislative mandate addressed chronic issues in the cooperative sector, including one-member-one-vote voting that concentrated influence among local stakeholders and impeded professional management, contributing to fragmented operations and vulnerability during the post-2008 crisis.
The reform targeted ten banks controlling over €530 billion in assets—more than 13% of the Italian banking system. The largest players had no choice but to transform or merge.
The Atlante Fund and State Intervention
In addition, a new fund named Atlas has been recently established, with the mission to complement the NPL scheme and to ensure the success of capital raising of banks that face market difficulties, acting as a subscriber of last resort.
Under this framework, on April 2016, an Italian-based management company (Quaestio Sgr) established a private alternative investment fund called Atlante 1. Some of the most important Italian banks and financial institutions provided the initial capital for the fund, €4.25 billion.
Banco Popolare, burdened by high non-performing loans exceeding €25 billion by 2016, participated as an anchor investor in the Atlante I fund launched in April 2016 to absorb bad loans from Italian banks and underwrite capital increases for failing institutions like Banca Popolare di Vicenza.
The message was clear: merge or die.
V. The Merger of Equals: Creating Banco BPM (2016-2017)
The Deal Structure
On May 24, 2016, the boards of Banco Popolare and Banca Popolare di Milano approved what would become Italy's largest banking merger in nearly a decade. Banco BPM S.p.A. is an Italian bank that commenced operations on 1 January 2017, by the merger (approved by the board of directors on 24 May 2016) of Banco Popolare and Banca Popolare di Milano (BPM).
Shareholders of Banco Popolare SC and Banca Popolare di Milano Scarl approved Italy's biggest banking merger since 2007, clearing the way to form the nation's third-biggest lender.
Banco Popolare and Banca Popolare di Milano were about to demutualize in 2016, due to Italian Law No.3 of 2015, but the two banking groups forming a new public societĂ per azioni directly, instead of demutualize themselves.
The shareholders of Banco BPM are the former shareholders of Banco Popolare and Banca Popolare di Milano in a proposed ratio of 54.626%:45.374%. After the capital increase of Banco Popolare in mid-2016, the final exchange ratio for the merger was 1 share of Banco Popolare to 1 share of Banco BPM, as well as 6.386 shares of Banca Popolare di Milano to 1 share of Banco BPM.
Giuseppe Castagna Takes the Helm
Banco Popolare CEO Pier Francesco Saviotti and Popolare di Milano CEO Giuseppe Castagna agreed on a merger plan in February. Shareholders approved the deal this weekend. Castagna will oversee the combined company, while Saviotti will become chairman of the executive committee.
Born in Naples in 1959, Giuseppe Castagna graduated in Law from Federico II University of Naples. His professional career began a year before his graduation, when he joined Banca Commerciale Italiana. He spent 33 years at Comit, then at Intesa Sanpaolo. Former general manager of Banco di Napoli, he is passionate about sports, especially swimming.
He was Chief Executive Officer and General Manager of Banca Popolare di Milano S.c. a r.l. from 2014 to 2016. He also held significant management positions at Intesa Sanpaolo banking group, from 1981 to 2013.
Castagna brought three decades of Italian banking experience and a reputation for operational rigor. He would need every bit of it.
Strategic Rationale and Scale
The bank has dual headquarters in Verona and Milan respectively.
The Banco BPM Group was established: a solid entity, with over 20,000 employees, 1,400 branches and around 4 million customers. Banco BPM, which today is Italy's third largest financial services group in terms of assets, has a deeply rooted presence in the regions of Northern Italy, including those with the highest industrial concentration in Europe.
The bank also claimed that the new bank would be ranked as the third in terms of branches (above 8%) and more specifically the first in Lombardy (above 15.5% where BPMilano, BPMantova and BPL were located), the third in Veneto (above 9.5% where BPV was located) and the third in Piedmont (above 12.5% where BPN was located).
Year Zero Challenges
The new entity faced immediate hurdles. Due to 2016 capital increase of Banco Popolare, the new banking group had a pro forma CET1 capital ratio of 12.30% at 31 December 2016.
But the NPL legacy loomed large. Pre-merger non-performing loan (NPL) ratios at Banco Popolare and BPM exceeded 20% on a gross basis, reflecting broader Italian banking fragmentation with over 500 institutions and average NPLs around 18% system-wide in 2015.
The question was whether two struggling banks could combine to create something greater than the sum of their parts—or whether the merger was simply rearranging deck chairs on a sinking ship.
VI. Project Exodus: The NPL Cleanup (2017-2020)
The Aletti Sale and Strategic Repositioning
Castagna moved quickly to reshape the portfolio. In the first year of establishment, the bank sold its asset management subsidiary Aletti Gestielle SGR to Anima Holding for €700 million.
This deal would prove ironic years later, when Banco BPM would spend €1.5 billion to acquire control of Anima. But in 2017, the €700 million provided critical capital and signaled a willingness to make hard choices.
Project Exodus: Cleaning the Balance Sheet
In the next year, the bank securitized a bad loans portfolio of €5.1 billion gross book value, credited it as "Project Exodus" and sold the securities to the market. The bank also applied for Garanzia sulla Cartolarizzazione delle Sofferenze (GACS), a state guarantee scheme for the senior tranche of the securities.
The securitization transaction, called "Project Exodus", concerns a portfolio of non-performing loans that are mostly mortgages having a total gross exposure of about €5.1 billion.
Banco Bpm ha completato l'operazione di cartolarizzazione del portafoglio di Npl da 5,1 miliardi di euro, battezzato Project Exodus. Nel dettaglio, il veicolo Red Sea SPV srl ha emesso tre classi di titoli: titoli senior per circa 1,66 miliardi di euro.
The ACE Project and Continued De-risking
Roma, 6 February 2019 – Credito Fondiario and Banco BPM today announced the completion of a securitisation structure (Leviticus), thus marking an important step in the implementation of their strategic partnership signed last December 2018. The partnership envisages a joint venture in NPL servicing and the disposal by Banco BPM of an NPL loan portfolio (Project ACE). The portfolio includes non-performing loans (NPLs) originated by Banco BPM and has a gross book value (GBV) of €7.4 billion.
As part of the partnership, Credito Fondiario and Banco BPM will enter into a joint venture, including the establishment of a servicing platform dedicated to NPLs and the execution of a ten-year servicing contract. Credito Fondiario will acquire a 70% stake of this platform, with Banco BPM retaining the remaining 30%. The platform will act as servicer of the securitised portfolio, of the residual stock of NPLs owned by Banco BPM, and of 80% of new flows of NPLs originated by Banco BPM over the next 10 years.
The Results: From 18% to Under 3%
The aggressive cleanup worked. The presentation emphasized the bank's solid asset quality, with a gross NPE ratio of 2.48%, and strong capital position with a CET1 ratio of 13.52%.
This transformation—from gross NPLs exceeding 18% to under 3%—represents one of the most successful de-risking campaigns in European banking history. The combination of the GACS state guarantee scheme, structured sales to specialist investors, and improved underwriting standards fundamentally changed Banco BPM's risk profile.
VII. Modern Banco BPM: Business Model & Strategy (2019-2024)
The Business Mix
A widespread network at the service of families and businesses, recognized brands and a deep knowledge of the market are the basis of the strength of Banco BPM, active in various areas of the banking sector (private banking, investment banking, asset management, bank-assurance, consumer finance and payments), also through the Group's investee companies.
In 2023 the bank's net income was €1,447.27 million. As of 2023, the bank employed 18,100 people.
Banco BPM is an Italian banking group of cooperative origin, present throughout Italy (with the exception of South Tyrol), operating since January 2017 and characterized by a strong local presence, particularly in Lombardy (where it is the largest operator with a market share of 15%), in Veneto, and in Piedmont. The group is the fourth largest Italian banking group after Intesa Sanpaolo, UniCredit, and BPER Banca. It boasts a market share of 7% and assets of 189 billion euros with approximately 3.7 million customers.
Transformation Strategy: Fee-Based Revenue
Under Castagna's leadership, Banco BPM has pursued a deliberate strategy to shift from net interest income dependency toward fee-based revenue. CEO Giuseppe's strategic vision, as mentioned in the Q1 earnings call, is being realized: "We are transforming a bank which was two-thirds led by commercial activity to a bank which will be led 50% by commission coming from product factory."
The Anima Acquisition: Closing the Circle
In a remarkable twist, Banco BPM moved to reacquire the asset management capabilities it had sold in 2017—this time by taking full control of Anima Holding.
Italy's third-largest bank, Banco BPM, has taken a significant step toward strengthening its position in the asset management and insurance market by making a €1.6 billion bid to acquire full control of Anima Holding. Banco BPM already holds a 22% stake in Anima, but this strategic acquisition aims to take Anima private.
Banco BPM SpA raised its bid for asset manager Anima Holding SpA, indicating that Italy's third-largest bank is determined to win over investors as it seeks to defend from the takeover attempt of UniCredit SpA. The Italian lender boosted its offer to €7 from €6.20 per share.
Following the Tender offer for Anima Holding S.p.A. launched in November 2024 by Gruppo Banco BPM, through Banco BPM Vita, the purchase of the no. 221,067,954 shares under the above-mentioned Tender offer, accounting for 67.976% of Anima Holding's share capital, was finalized on 11 April 2025.
The successful completion of the tender offer for Anima in April 2025 represents a milestone in Banco BPM's transformational strategy. The bank increased its stake from 22% to approximately 90%, consolidating Anima's results starting from Q2 2025. This acquisition has dramatically expanded the group's asset management capabilities, increasing Banco BPM's total customer financial assets from €207 billion to €383 billion.
Financial Performance: Record Results
Banco BPM reported H1 2025 stated net income of €1.214 billion, a substantial 62% increase from €750 million in H1 2024. On a like-for-like basis (excluding Anima's contribution), net income still grew impressively by 31.2% to €984 million.
The CET1 ratio stands at 13.3%, well above the 13% target, with the acquisition having a 242 basis point impact that was partially offset by 132 basis points of organic capital generation. Banco BPM has confirmed its positive outlook for the remainder of 2025, with guidance pointing to continued revenue growth, improved cost efficiency, and lower provisions. The bank has also announced an attractive dividend policy, with the 2025 interim dividend expected to increase by 17% compared to 2024, representing an annualized yield of 8%.
VIII. The UniCredit Takeover Battle (2024-2025)
The Hostile Bid
UniCredit SpA made an unsolicited €10 billion ($10.5 billion) bid for domestic rival Banco BPM SpA as Chief Executive Officer Andrea Orcel's ambitions to buy Germany's Commerzbank AG face local opposition and delays. Orcel has long had Banco BPM in his sights, and the offer timing may have been driven by recent deals that could create a new force in Italian banking. Banco BPM bought a 5% stake in Banca Monte dei Paschi di Siena SpA from the government, and it's also seeking to take over asset manager Anima Holding SpA.
Political Opposition and Golden Power
Italy has limited scope to intervene in UniCredit's swoop for smaller rival Banco BPM through its "golden powers." So-called golden powers allow Italy's government to block or set conditions on foreign and domestic corporate takeovers in strategic sectors such as energy, telecoms and banking. UniCredit's move has derailed a government's push to combine BPM with state-backed Monte dei Paschi di Siena (MPS) to form a third large bank alongside Intesa Sanpaolo and UniCredit.
While Banco BPM considered the move hostile and the offer insufficient, the Italian government of Prime Minister Giorgia Meloni similarly opposed it, as it would have thwarted its plans to create a third banking group in Italy, comprising Banco BPM and Monte dei Paschi di Siena (MPS). In April, the government exercised its "golden power" provision, which cited national security concerns due to UniCredit's operations in Russia.
The move angered ministers from the League party led by Deputy Prime Minister Matteo Salvini.
Eight Months of Standoff
The battle became a test case for European banking consolidation versus national sovereignty.
Italy has been hit by a preliminary European Union warning over its use of so-called Golden Powers to restrict UniCredit SpA's planned takeover of Banco BPM SpA. In a legal move that sets up a power struggle between Brussels and Rome, EU officials accused Giorgia Meloni's government of potentially violating EU law in imposing national conditions on the deal.
The Administrative Court of Lazio toppled the Italian government's request to lower the loan-to-deposit ratio at Banco BPM and UniCredit in Italy for five years, and to not reduce the current level of Banco BPM and UniCredit's project finance portfolio in Italy.
The Withdrawal
After 241 days, UniCredit has withdrawn its EUR10 billion bid for Banco BPM, a deal stymied by government restrictions and uncertainty surrounding the so-called golden power.
Therefore, to bring clarity to the situation and protect the best interests of UniCredit and our shareholders, we have taken the decision not to waive the Golden Power condition, which has not been fulfilled, and hence we have withdrawn our offer. This is a missed opportunity not only for BPM stakeholders but also for Italy's businesses, communities and wider economy.
"We've drawn a line under this [Banco BPM] transaction. To be honest, it had become a drag on us. We feel we were accelerating way further than they were, and the value had shifted," the UniCredit boss added.
Crédit Agricole: The New Strategic Partner
With UniCredit's retreat, Crédit Agricole has emerged as the key strategic stakeholder.
The Board of Directors of Crédit Agricole S.A. has approved to file an authorization request with the ECB to cross 20% in the share capital of Banco BPM S.p.A. With this authorization, Crédit Agricole S.A., who currently holds 19.8% in the share capital of Banco BPM, intends to buy a sufficient number of shares to position its stake in Banco BPM just above the 20% threshold, in order to qualify it within the framework of "significant influence" and to account it pursuant to the equity method, consistently with Crédit Agricole S.A.'s position as long term shareholder and industrial partner of Banco BPM. Crédit Agricole S.A. does not intend to acquire or exercise control on Banco BPM and will maintain its stake below the mandatory tender offer threshold.
IX. Competitive Analysis: Porter's Five Forces
1. Threat of New Entrants: LOW-MEDIUM
Banco Popolare and BPM, then Banco BPM have been designated as a Significant Institution since the entry into force of European Banking Supervision in late 2014, and as a consequence Banco BPM is directly supervised by the European Central Bank.
This direct ECB supervision creates massive regulatory barriers. New entrants must navigate Basel III/IV capital requirements, secure banking licenses, and build the branch networks and local relationships that remain critical in Italian SME banking. Digital challengers like N26 and Revolut have gained traction in payments and deposits, but struggle to replicate the lending relationships built over 150 years.
2. Bargaining Power of Suppliers: LOW
The ECB controls monetary policy and liquidity access. Interbank funding markets are largely commoditized. Technology vendors have moderate power, but banks are increasingly in-sourcing critical IT functions.
3. Bargaining Power of Buyers: MEDIUM-HIGH
Retail customers have increasing choice through digital alternatives. SMEs remain relationship-driven but increasingly price-sensitive. Corporate clients can access capital markets directly, reducing dependence on bank lending. However, trust advantages remain significant in Italy's relationship-driven economy.
4. Threat of Substitutes: MEDIUM-HIGH
Fintech platforms for payments (PayPal, Apple Pay), alternative lending platforms for SMEs, and asset managers competing for savings all create pressure. However, traditional banks retain significant trust advantages in Italy, where personal relationships with bankers remain culturally important.
5. Industry Rivalry: HIGH
UniCredit's bid for Banco BPM sparked an M&A rush among Italian banks. Mid-sized players are rushing to secure deals not just to expand their operations but also to defend their market positions. Most of the major Italian players are involved: UniCredit, Banco BPM, MPS, BPER and Mediobanca.
The three-player market structure (UniCredit, Intesa Sanpaolo, and the emerging "third pole") creates intense competition. Net interest margin compression from the rate environment adds pressure.
X. Hamilton's 7 Powers Analysis
1. Scale Economies: MODERATE
As of 1 January 2017, the date of formation, Banco BPM is the third largest retail and commercial banking conglomerate by pro forma total assets in Italy, behind UniCredit and Intesa Sanpaolo.
The bank achieved meaningful cost synergies from the 2017 merger and the Anima acquisition. However, scale remains smaller than UniCredit and Intesa, limiting procurement leverage and technology investment capacity.
2. Network Effects: WEAK
Traditional banking has limited network effects. Payment systems have some network characteristics but operate on shared infrastructure. The bank's customer base of 4 million is large but not self-reinforcing in the way platform businesses are.
3. Counter-Positioning: MODERATE
The Group operates in the tradition of 'popolari' banks, generating profitability for its shareholders and creating value for all its stakeholders in the areas in which it is present, so as to play a leading role in the sustainable and inclusive development of the country.
The cooperative heritage creates differentiated positioning versus larger commercial banks. Local focus contrasts with the pan-European ambitions of UniCredit. This positioning resonates with SME clients who value relationship banking.
4. Switching Costs: HIGH
Primary banking relationships are sticky—particularly for SMEs where lending relationships are built over years of credit history. Mortgage and loan portfolios create long-term customer lock-in. Italian customers remain historically loyal to local banks.
5. Branding: MODERATE
Strong regional brand recognition in Lombardy, Veneto, and Piedmont. The BPM brand maintains trust advantages from its cooperative heritage. However, national brand awareness trails larger competitors.
6. Cornered Resource: LOW
No unique proprietary resources distinguish Banco BPM. Talent can move between banks. Technology is largely commoditized or available from vendors.
7. Process Power: DEVELOPING
CEO Giuseppe Castagna noted during the earnings call that the bank has "completed almost the product factory activity," suggesting a shift toward optimization and growth of existing business lines.
The successful NPL cleanup and Anima integration suggest improving operational capabilities. The transformation from a lending-focused bank to a diversified financial services provider requires ongoing process excellence.
XI. The Broader Italian Banking Landscape
The Consolidation Wave
Banco BPM's story cannot be separated from the broader Italian banking transformation occurring in 2024-2025.
The European banking sector has long been fragmented, but 2025 marks a turning point. M&A activity has surged to record levels, with announced deals exceeding $27 billion year-to-date—double the 2024 pace. This acceleration is fueled by three key drivers: regulatory tailwinds, capital surplus, and strategic imperatives.
The government's push to reduce sector fragmentation—evidenced by BPER Banca's acquisition of Banca Popolare di Sondrio and the ongoing UniCredit-Banco BPM negotiations—reflects a broader strategy to create resilient, globally competitive entities. The Siena-Milan merger, if successful, would create a "third pole" in Italy's banking hierarchy, challenging the dominance of Intesa Sanpaolo and UniCredit.
Following MPS's acquisition of Mediobanca and BPER's takeover of BPSO, we expect Banco BPM to play a more active role in Italy's banking consolidation wave, which is being driven by financial as well as strategic and political factors. Banco BPM has returned to the centre of consolidation talk after UniCredit's failed bid. But with MPS and BPER concluding their respective bids, options have narrowed.
Crédit Agricole: The Potential Partner
Against this backdrop, Crédit Agricole Italia (CA Italia) has emerged as a potential partner. The French banking group considers Italy to be its second domestic market and an area for growth.
Unlike in the MPS-Mediobanca deal, both groups operate as universal banks, offering comprehensive and complementary services across banking, wealth management and insurance. Banco BPM's lending portfolio is geared towards business clients, while Crédit Agricole Italia's is more tilted towards retail customers. Their branch networks overlap in Lombardy, Veneto, Tuscany and Sicily, offering the potential for cost cutting.
XII. Key KPIs for Monitoring Banco BPM
For long-term fundamental investors tracking Banco BPM, three metrics deserve close attention:
1. Fee Income as a Percentage of Total Revenue
The transformation strategy depends on shifting from net interest income (vulnerable to rate movements) toward fee-based revenue (more stable, higher-quality earnings). Increasing contribution from Non-interest components (49% of Total Revenues PF vs. 39% in 9M24). Tracking this ratio reveals progress toward Castagna's stated goal of 50% fee income.
2. CET1 Ratio and Organic Capital Generation
The bank generated 152 basis points of CET1 capital in nine months, even after absorbing €1.17 billion of accrued dividends (equivalent to 203 basis points). Organic capital generation demonstrates the bank's ability to grow capital while returning cash to shareholders—the hallmark of a sustainable banking model.
3. Gross NPE Ratio
The successful cleanup from 18%+ to under 3% must be maintained. Asset quality continued to improve, with gross non-performing exposures (NPEs) down 23% year-over-year. Any deterioration would signal a reversal of the hard-won de-risking achievements.
XIII. Bull and Bear Cases
The Bull Case
Scale in Italy's Best Markets: Banco BPM dominates Lombardy (15%+ market share) and holds strong positions in Veneto and Piedmont—Italy's industrial heartland. These regions generate disproportionate SME lending opportunities.
Fee Income Transformation: The Anima acquisition positions Banco BPM as an integrated financial services provider. This acquisition has dramatically expanded the group's asset management capabilities, as illustrated in the following slide: The Anima consolidation has increased Banco BPM's total customer financial assets from €207 billion to €383 billion.
Shareholder Returns: The bank's 80% payout ratio and 8% dividend yield attract income-focused investors. Strong capital generation allows simultaneous shareholder returns and strategic flexibility.
Strategic Options: With Crédit Agricole holding nearly 20% and seeking to expand, Banco BPM has options. A friendly merger could create meaningful synergies while avoiding the regulatory and political battles that sunk UniCredit's bid.
The Bear Case
Interest Rate Sensitivity: Despite diversification efforts, net interest income remains 51% of revenue. Faster ECB rate cuts would pressure margins.
Political Uncertainty: The golden power episode demonstrated that Italian banking remains politically sensitive. A future government could impose unexpected constraints.
Integration Risk: The Anima acquisition requires flawless execution. While challenges remain, including the potential impact of interest rate fluctuations and economic uncertainty in Italy and Europe, the bank appears well-positioned to continue its positive trajectory toward achieving its 2027 strategic objectives.
Competitive Pressure: While banks have guided to equally strong results in 2025, faster or deeper-than-expected ECB rate cuts represent a key risk. Beyond 2025, we deem Banco BPM, UniCredit and BPER's projected double-digit returns on tangible equity of above 16% to be overly optimistic and subject to downside risks given uncertain economic and monetary conditions.
XIV. Conclusion: The Fight for Italy's Third Pole
The story of Banco BPM is the story of Italian banking itself—from the cooperative idealism of Luigi Luzzatti in 1865, through the crisis years of 2014-2016, to the modern battles over European consolidation and national sovereignty.
In July, UniCredit's board of directors withdrew its bid for Banco BPM, declaring it impossible to proceed due to the Italian government's use of golden power to block the merger.
But the withdrawal was not an ending—it was the beginning of the next chapter. With MPS pursuing Mediobanca, BPER acquiring Banca Popolare di Sondrio, and Crédit Agricole positioning for influence, Banco BPM remains at the center of Italy's banking transformation.
The European Commission has opened an infringement procedure against Italy regarding the use of the golden power rule to block the acquisition of Banco Bpm by UniCredit. The Commission expressed concern about the regulation, which gives the Italian government wide prerogatives to examine, block, or impose conditions on corporate transactions in the banking sector.
The tension between European integration and national control will define the sector's evolution. Banco BPM, with its cooperative heritage, Northern Italian stronghold, and transformed balance sheet, embodies both the promise and the challenge of building "European champions" from national fragments.
For long-term investors, the key question is not whether Banco BPM will be acquired—it is whether the bank's standalone strategy can create more value than absorption into a larger entity. The answer depends on execution of the fee income transformation, maintenance of asset quality, and navigation of the political currents that continue to shape Italian banking.
One hundred sixty years after Luigi Luzzatti founded Banca Popolare di Milano to serve Milanese artisans and merchants, his institution's successor remains true to its roots: serving the SMEs of Northern Italy while adapting to survive in a world its founder could never have imagined. That adaptability—not just survival, but genuine transformation—may be Banco BPM's most valuable asset of all.
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