BNP Paribas CEO Doubts Revival of M&A in European Banking

BNP Paribas CEO, Jean-Laurent Bonnafé, has voiced scepticism regarding the potential resurgence of mergers and acquisitions (M&A) activity within the European banking sector. Speaking at a shareholder meeting on Tuesday (May 14), Bonnafé underscored the economic complexities associated with both cross-border and domestic deals, casting doubt on prospects for heightened consolidation, as reported by Reuters.

Bonnafé’s remarks come amidst Spain’s BBVA launching a hostile takeover bid for its domestic counterpart Sabadell, and French President Emmanuel Macron advocating for increased banking consolidation across Europe.

However, Bonnafé contended that the financial rationale behind such deals often falls short, particularly for entities operating across national borders. He highlighted the myriad challenges inherent in cross-border transactions, including divergent regulatory frameworks, labour laws, the absence of a euro zone-wide deposit insurance scheme, and political considerations.

Drawing a comparison, Bonnafé illustrated that the potential cost synergies between acquiring a Texas bank and a Californian bank could be significantly higher, around 100, compared to a mere 33 in a similar scenario involving two European countries.

Despite longstanding calls from European regulators for greater banking consolidation to bolster financial stability, Bonnafé emphasised the hurdles even within domestic deals. Buyers frequently face the burden of paying a premium for their target, while larger banks necessitate heightened supervision.

Sergio Ermotti, CEO of Swiss bank UBS, echoed Bonnafé’s sentiments, suggesting that achieving European consolidation without a banking union and proper framework would prove challenging.

BBVA’s latest hostile bid for Sabadell follows the rejection of an earlier merger proposal by Sabadell’s board of directors. Despite BBVA characterising the offer as generous, Sabadell determined that it did not align with the best interests of the bank and its shareholders.

UBS’s acquisition of Credit Suisse in March 2023, following a period of uncertainty within the banking sector, underscores the dynamic nature of M&A activity in the European banking landscape.