Sept 12 (Askume) – European bank shares continued to rise on Thursday, driven by UniCredit’s (CRDI.MI) acquisition of a 9% stake in Commerzbank (CBKG.DE) a day earlier .
The pan-European STOXX 600 banking sub-index (.SX7P) was up 1.9% by 1010 GMT as analysts said the mergers and acquisitions (M&A) outlook in the sector was growing.
ABN AMRO (ABND.AS) gained 4% after the Dutch government on Wednesday cut its stake in the country’s second-largest bank to 40.5% from 49.5% .Italian Bank BPM(BAMI.MI) and Societe Generale (SOGN.PA) also rose 3.7% and 2.7%, respectively.
All three are seen as potential targets for further mergers and acquisitions, analysts say.
ING said in a research note that UniCredit’s overseas expansion could boost interest in smaller European banks such as ABN, while JPMorgan wrote that banks historically seen as M&A targets could see their valuations rise.
JPMorgan said UniCredit is open to acquisitions in the domestic market, underlining the Italian bank’s previous interest in smaller rival BPM.
Analysts at JPMorgan and Morningstar said Societe Generale was another takeover candidate.
“The market sees Societe Generale and ABN Amro as takeover targets,” said Morningstar analyst Johann Scholtz. “They trade at lower prices than their competitors, making them a more affordable option, and their market value is comparable to full price.
The commercial bank deal could spark an unprecedented wave of takeovers in the industry, as European banks are strapped for cash after years of rising interest rates and their shares trade at multi-year highs.
However, different regulations and strict labour laws may hinder cross-border mergers in the fragmented EU banking sector . Previous M&A deals in Europe were often executed in a state of crisis, slowing down consolidation among credit institutions.
JPMorgan Chase said, “We need structural reforms in Europe, which has 4,900 banks and 1,300 in Germany alone. This reiterates our constructive view on the banking industry.”
