Money In The Bank: Italian Banks: Competing bids

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Money In The Bank: Italian Banks: Competing bids

elsewhere on the senior pref and tier 2 curve where see more limited upside risk vs

Italian peers.

Upside risk: 1) More agency upgrades, a takeover bid by a stronger peer, governance

risks dispelled

Downside risk: 1) Legal risks, asset quality risks, M&A risks, Integration risks, governance

risks

Banco BPM (BAMIIM)

Banco BPM's spreads now typically reflect the material improvement in asset quality and

profitability. Manufacturing exposure may become a relevant sensitivity, particularly in

combination with other energy-intensive industries to which the bank has an above-

average exposure, if the Iran war strains these borrowers. Over time, the 20% stake

purchase by Credit Agricole may provide upside to spreads should CredAg decide to

expand its stake. This is too far in the investment horizon for now, in our view.

We are UW the €4.5% '36-31 and the €5% T2s which screen rich given the bank's above-

average sensitivity to energy-intensive corporates. Valuation looks fair on the 0.875% Sr

Pref, and the 3.375% and 3.25% subordinated bonds. We are also MW the 6% '28-27 in

senior non-preferred and the 4.875% '27 senior preferred bonds. We are OW the

€3.875% SNP '30-29s and €4.875% SNP '30s which offer sizeable discounts to peers,

with potential upside to ratings should M&A activity materialise.

Upside risks: a potential full takeover by a more creditworthy parent, faster NPL

reduction, more clarity on loan loss provisions. Downside risks: higher loan loss

provisions e.g. from exposure to more energy-intensive sectors, capital ratios and

buffers markedly deteriorating, significantly weaker profitability.

Intesa Sanpaolo (ISPIM)

Intesa is a solid performer, we think. The SNP bonds are marginally wider yet benefit