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Italo-Spanish bank merger hangs in balance

ROME: The fate of a major banking merger between Italy's UniCredito and Spain's BBVA hung in the balance on Thursday as a tug of war intensified for smaller bank Banca Nazionale del Lavoro (BNL).

Shares in BNL jumped more than four percent, far outpacing a slightly firmer bourse, as speculation seethed over the fate of the Rome-based bank, a key pawn in the Italo-Spanish game.

UniCredito, Italy's third largest bank by assets, maintains BNL is necessary to its plans to join forces with Spain's Banco Bilbao Vizcaya Argentaria as a first step in one of European banking's first major cross-border mergers.

BBVA is one of BNL's main shareholders with 10 percent, and had been expected to hand that stake to UniCredito to bring the size of the Italian bank closer to that of its bigger Spanish fellow.

But BNL is fiercely opposed to being swallowed up by UniCredito Italiano, and rival Italian bank Monte dei Paschi di Siena is now moving fast to trump UniCredito.

UniCredito shares were 2.56 percent weaker by 1113 GMT at 4.30 euros, while BNL was up 4.1 percent at 3.48 euros.

UniCredito's top brass are expected to consult Bank of Italy Governor Antonio Fazio - whose blessing is vital for any merger - any time now, and newspapers said that the crunch meeting could take place as soon as Thursday, or Friday morning.

That would give Chief Executive Alessandro Profumo and Chairman Lucio Rondelli some concrete answers to supply their shareholders at a meeting scheduled for Friday.

Fazio is known to favour mergers of equals, but there has been confusion over where exactly he stands in the battle of UniCredito versus Monte dei Paschi .

A Spanish banking source said earlier this week that the Italian Treasury opposed the BBVA-UniCredito alliance but that the Bank of Italy was in favour.

A former BNL chairman later told Reuters, however, that "authoritative sources" had told him the central bank preferred a homegrown tie-up between BNL and Monte dei Paschi, which could scupper any BBVA-UniCredito deal.

A BNL/Monte dei Paschi alliance would fulfil Fazio's desire to see a central-southern Italian banking axis amid the swathe of Milan-dominated banking groups to emerge from the recent round of industry consolidation.

Monte dei Paschi di Siena is accelerating its moves to trump UniCredito. The foundation that controls the Sienese bank is to gather on Monday, and banking sources told Reuters it might study a possible alliance with BNL at that meeting.

Monte dei Paschi shares fell 0.69 euros to 3.61 euros.

BNL's management has the ear of the Treasury, which has a 2.47 percent in it, but it is unclear whether it has the backing of the core shareholders - BBVA, insurer INA and northern Italian bank Banca Popolare Vicentina - which hold 25 percent of it.

Business daily Il Sole 24 Ore said members of Prime Minister Massimo D'Alema's party, the Democrats of the Left (DS), close to the premier favoured a Monte dei Paschi/BNL merger.

The DS, which is the biggest party in the ruling coalition, traditionally dominates the foundation controlling Monte dei Paschi, the world's oldest bank.-Reuters