Credit Agricole in Talks to Buy Banks to Fuel Italian Growth

(Bloomberg) -- Credit Agricole SA, France’s third-largest bank, aims to expand in Italy by buying three troubled local savings lenders that authorities are seeking to rescue.

Credit Agricole’s Italian retail banking subsidiary, Cariparma, is in preliminary talks with the Bank of Italy and the country’s deposit protection fund to buy the Cesena, Rimini and San Miniato savings banks, the French company said in a statement late Monday. The deal doesn’t include the lenders’ bad debts, which would be deconsolidated before a sale, Credit Agricole said.

The three local banks comprise about 250 branches when taken together, mostly in the Tuscany and Emilia-Romagna regions, according to their respective websites. The purchase would increase Credit Agricole’s Italian customer base by 20 percent, the bank said. Over the past decade, Credit Agricole has expanded its footprint in Italy’s wealthy north and central regions.

Credit Agricole was little changed at 13.75 euros at 11:05 a.m. in Paris trading Tuesday, valuing the bank at 39.1 billion euros ($42.6 billion). Euro-zone banks on Monday had their biggest rally since August 2012 after the first round of France’s presidential elections put centrist Emmanuel Macron ahead of anti-euro Marine Le Pen.

A purchase of the Italian banks would reduce Credit Agricole’s common equity Tier 1 ratio by less than 0.1 percent, or 10 basis points, the bank said. Chief Executive Officer Philippe Brassac last year set out goals to increase annual profit to more than 4.2 billion euros in 2019 through cost cuts and investments in areas including insurance, online banking and asset management.

Credit Agricole is betting on Italy even as parts of the country’s financial system are burdened by soured loans and its economic recovery is lagging behind France, Germany and other European economies. Amundi SA, Credit Agricole’s fund-management division, is buying Pioneer Investments from Milan-based UniCredit SpA in a 3.5 billion-euro deal.

Credit Agricole has 1.7 million retail-banking customers in Italy.