Banco BPM Weighing Sale, Partnership for Payments Unit, CFO Says

(Bloomberg) -- Banco BPM SpA is considering a possible sale or partnership for its payments unit, as Italy’s third-largest bank shifts strategy in a bid to maximize shareholder value. 

“We are examining all the options for our merchant-acquiring business, including a disposal or a joint venture agreement,” Chief Financial Officer Edoardo Ginevra said in an interview at the bank’s headquarters in Milan. “In the past Banco BPM’s moves to value its assets were done to finance derisking, now our purpose is to ensure significant remuneration for shareholders.” 

Banco BPM is moving away from restructuring and shifting toward sustainable returns by strengthening and reviewing areas like asset management, private banking, consumer credit and insurance while pushing forward digitalization. 

Ginevra said he’s confident the bank can post higher full-year profit, reduce provisions for bad loans and provide a dividend payout of at least 40%, if the Russian invasion of Ukraine doesn’t create overly disruptive effects.

“I expect 2022 profit somewhere in between last year’s net income and the 2023 target,” the CFO said. “For dividends, we have a commitment of a payout ratio of 40%, but we are confident we can go higher, having already distributed 50% for 2021.” 

Since its creation from the 2017 merger between Banco Popolare and Banca Popolare di Milano, Banco BPM has curbed risk, cut costs and reshuffled businesses. 

In November the lender announced a strategy targeting more than 1 billion euros ($1.1 billion) of profit by 2024. For the fourth quarter Banco BPM reported higher-than-expected profit and surprised investors with a decision to distribute a cash dividend of 19 euro cents per share, or a 50% payout ratio, on 2021 earnings. 

The bank’s share price doesn’t reflect its fundamentals and future profitability, Ginevra said, arguing that current levels reflect legacies of restructuring.

Banco BPM trades at about 0.32 times its tangible book value compared with 0.72 times for Italy’s largest bank Intesa Sanpaolo SpA and 0.37 for UniCredit SpA. 

Key Interview Takeaways 

• Ginevra sees a non-material impact from direct exposure to Russia, with commercial lending commitments and loans totaling about 120 million euros, equal to 0.06% of total assets. The lender is monitoring the indirect effects from a protracted crisis, said the executive, adding that “Banco BPM has the advantage that its clients are based in one of the wealthiest and most active regions.”
• Banco BPM’s capital is sound and bank has a stable flow of revenue, the CFO said.
• Ginevra reiterated that the bank is interested in M&A through combinations with banks of similar size, “even if there is no scope for any deal at the moment.”
• “If the impact of the war is limited we see a cost of risk of 55 basis points as a good starting point for this year.”
• On bancassurance business the CFO said the group is considering accelerating the the process of acquiring full ownership of local partnerships.
• Ginevra confirmed targets through 2024 set in the bank’s business plan: Banco BPM Targets Wealth Management, Digital to Boost Profit. 

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