By Andrea Mandala, Sudip Kar-Gupta and Pablo Mayo Cerqueiro
ROME/PARIS (Reuters) -Credit Agricole on Friday struck a long-term bancassurance partnership with Italy's Banco BPM, strengthening ties with the country's number three lender, in which it is already the top investor.
The French bank, which took a 9.2% stake in Banco BPM in April, has said it invested to expand their commercial partnerships which previously focused on consumer credit.
However, given the French group's presence in Italy, the investment in Banco BPM has stoked speculation that a full takeover could follow.
The deal announced on Friday allows the provision of non-life insurance products and related services through Banco BPM's networks for a 20-year period.
It also stipulates that the French bank's Credit Agricole (EPA:CAGR) Assurances (CAA) division will buy from Banco BPM a 65% stake in its non-life insurance business.
That currently comprises the non-life operations of its former Covea joint venture, to which Banco BPM will add the non-life venture with Cattolica, now a unit of Generali (BIT:GASI), once it exercises a repurchase option.
Banco BPM said the deal valued the two insurance companies at 400 million euros ($424 million), meaning Credit Agricole will have to pay 260 million euros for the majority stake.
THIRD FORCE
Banco BPM CEO Giuseppe Castagna, up for reappointment in April, has sought to make his lender the centrepiece of a third large banking group in Italy, to compete with heavyweights Intesa Sanpaolo (BIT:ISP) and UniCredit (LON:0RLS).
Given its middle ranking, Banco BPM is, however, seen as a potential takeover target for UniCredit, Credit Agricole or another player. Its shares have risen more than 25% this year to value it at over 5 billion euros.
Credit Agricole has always denied wanting to lift its stake above 10%, and key figures in the new centre-right Italian government have been critical of its expansion plans in Italy.
Sources have told Reuters that Credit Agricole was keen to avoid friction with the government of a country which is its biggest foreign market.
With Rome needing to find a buyer for state-owned Monte dei Paschi, Banco BPM is seen as a possible partner for the Tuscan lender in a move that would allow it to bulk up and be less of a takeover target.
"Credit Agricole's decisions to build a 9% stake in Banco BPM and strike a bancassurance agreement with them are very strategic, also in light of their joint venture in consumer lending," said Noemi Peruch, banking analyst at Mediobanca.
Besides protecting Credit Agricole's local interests, the moves could also pave the way for an eventual takeover of Banco BPM, in a similar fashion to the French group's previous acquisition of Credito Valtellinese.
"Credit Agricole typically plays the long game and sees Italy as a key market," Peruch said.
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