Finance

Why Italy could see big M&A deals in banking

Published

2 months ago

August 8, 2024

Business Finance News

Banking analysts assess the possibility of a banking merger in Italy.

Bloomberg | Bloomberg | Getty Images

MILAN, Italy — European policymakers have longed for bigger banks across the continent.

And Italy might be about to give them their wish with a bumper round of M&A, according to analysts.

Years after a sovereign debt crisis in the region and a government rescue for Banca Monte dei Paschi (BMPS) that saved it from collapse, many are looking at Italy’s banking sector with fresh eyes.

“If you assess individual banks in Italy, it’s difficult not to believe that something will happen, I would say, over the next 12 months or so,” Antonio Reale, co-head of European banks at Bank of America, told CNBC.

Reale highlighted that BMPS had been rehabilitated and needed re-privatization, he also said UniCredit is now sitting on a “relatively large stack of excess of capital,” and more broadly that the Italian government has a new industrial agenda.

UniCredit, in particular, continues to surprise markets with some stellar quarterly profit beats. It earned 8.6 billion euros last year (up 54% year-on-year), pleasing investors via share buybacks and dividends.

Meanwhile, BMPS, which was saved in 2017 for 4 billion euros, has to eventually be out back into private hands under an agreement with European regulators and the Italian government. Speaking in March, Italy’s Economy Minister Giancarlo Giorgetti said “there is a specific commitment” with the European Commission on the divestment of the government stake on BMPS.

What Meloni achieved in her China trip this week is a win-win for both countries: Economist

“In general, we see room for consolidation in markets such as Italy, Spain and Germany,” Nicola De Caro, senior vice president at Morningstar, told CNBC via email, adding that “domestic consolidation is more likely than European cross-border mergers due to some structural impediments.”

He added that despite recent consolidation in Italian banking, involving Intesa-Ubi, BPER-Carige and Banco-Bpm, “there is still a significant number of banks and fragmentation at the medium sized level.”

“UniCredit, BMPS and some medium sized banks are likely to play a role in the potential future consolidation of the banking sector in Italy,” De Caro added.

Speaking to CNBC in July, UniCredit CEO Andrea Orcel indicated that at current prices, he did not see any potential for deals in Italy, but said he is open to that possibility if market conditions were to change.

“In spite our performance, we still trade at a discount to the sector […] so if I were to do those acquisitions, I would need to go to my shareholders and say this is strategic, but actually I am going to dilute your returns and I am not going to do that,” he said.

CNBC takes a tour of Ferrari's new e-building

“But if it changes, we are here,” he added.

Paola Sabbione, an analyst at Barclays, believes there would be a high bar for Italian banking M&A if it does occur.

“Monte dei Paschi is looking for a partner, UniCredit is looking for possible targets. Hence from these banks, in theory several combinations could arise. However, no bank is in urgent need,” she told CNBC via email.

European officials have been making more and more comments about the need for bigger banks. French President Emmanuel Macron, for example, said in May in an interview with Bloomberg that Europe’s banking sector needs greater consolidation. However, there’s still some skepticism about supposed mega deals. In Spain, for instance, the government opposed BBVA’s bid for Sabadell in May.

“Europe needs bigger, stronger and more profitable banks. That’s undeniable,” Reale from Bank of America said, adding that there are differences between Spain and Italy.

“Spain has come a long way. We’ve seen a big wave of consolidation happen[ing] right after the Global Financial Crisis and continued in recent years, with a number of excess capacity that’s exited the market one way or the other. Italy is a lot more fragmented in terms of banking markets,” he added.

Finance

After rejecting Google takeover, Wiz says will IPO when ‘stars align’

Published

59 mins ago

October 18, 2024

Business Finance News

Wiz co-founder discusses the company's expansion into the UK

LONDON — Cybersecurity firm Wiz is seeking to hit $1 billion of annual recurring revenues next year, the company’s billionaire co-founder Roy Reznik told CNBC, adding that the firm will go public “when the stars align.”

Wiz makes software that connects to cloud storage providers like Amazon Web Services or Microsoft Azure and scans for everything it stores in the cloud, helping organizations identify and remove risks in their cloud environments. It was founded by four Israeli friends while they served in 8200, the intelligence unit of Israel’s army, and most of Wiz’s engineering personnel are still based in Tel Aviv, Israel.

Earlier this year, the company rejected a $23-billion acquisition bid from Google, which would have marked the tech giant’s largest-ever takeover. At the time, Wiz CEO Assaf Rappaport said the startup was “flattered” by the offer, but would remain an independent company and aim to list instead.

Speaking with CNBC at Wiz’s new office space in London, Reznik said that the company has received offers from “many people that want to get their hands on Wiz stock” — but that, while “very flattering,” the firm still thinks it can do it alone by going public.

“We’ve already broken a few records as a private company, and we believe we can also break a few more records as an independent public company as well,” Reznik said.

Four-year-old Wiz has raised $1.9 billion in venture capital to date, including $1 billion secured this year in a funding round led by Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital at a valuation of $12 billion.

In 2022, Wiz said it had reached $100 million in annual recurring revenue (ARR), up from just $1 million in 18 months. At the time, the startup said it was “the fastest software company to achieve this feat.”

Reznik, who is the vice president of research and development at Wiz, said the firm now hopes to double from the $500 million of ARR it achieved this year and hit $1 billion in ARR in 2025, which CEO Rappaport cited as a key condition before the company goes public.

UK expansion

Wiz has been expanding its presence internationally, with a particular focus on Europe, from where it sources 35% of its revenues. Last month, the firm opened its first European office in London.

“I think the talent here is amazing, and the ecosystem is amazing,” Reznik told CNBC. “We have always been very much involved in Europe — and specifically the U.K. — and I feel like it’s a natural evolvement of Wiz to double down even more here in London and the U.K.”

The U.K. represents a major growth opportunity when it comes to cybersecurity, Reznik said, adding that recent events like the cyberattack on National Health Service hospitals and an incident affecting Transport for London have “roof topped” the level of interest in the kinds of products Wiz offers.

“The cloud market is going to reach $1 trillion over the next next few years,” Reznik, who moved from Israel to the U.K. just three months ago, told CNBC. “This year is going to be around $700 million, while security is just 4% out of that, I would say. So that makes it a $30 billion market, which is huge.”

Speaking about the U.K. market, Reznik said: “We see a lot of interest here. Many of the largest banks and retailers, are Wiz customers. But we’re also seeing a huge potential for growth.”

Wiz’s customers include online retailer ASOS and digital bank Revolut as customers in the U.K.