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June 4, 2018updated 28 Jun 2018 8:43pm

UniCredit and SocGen in possible merger talks: report

Italy's biggest banking group UniCredit is in talks to merge with France's Societe General (SocGen), according to reports, in a move that would exponentially expand the two bank's capabilities in leasing and other sectors.

By Lorenzo Migliorato

Italy’s biggest banking group UniCredit is in talks to merge with France’s Societe Generale (SocGen), according to reports, in a move that would expand the two banks’ capabilities in leasing and other sectors.

The Financial Times reported on Monday that Jean-Pierre Mustier, UniCredit’s chief executive, who headed SocGen’s corporate and investment banking division between 2003 and 2009, had been considering a possible merger for months.

The paper cited sources close to the situation, who specified no formal approach had been made, but added directors on SocGen’s side had been also exploring the possibility.

The two banks are of comparable size, with market capitalisation of €32bn (£28bn) for SocGen and £33bn for UniCredit.

Societe Generale Equipment Finance (SGEF), the French group’s leasing arm, has one of the most extensive presences worldwide in the leasing market, operating in around 35 territories and most European Economic Area (EEA) countries.

UniCredit’s leasing apparatus is more modest compared to SocGen’s. Even in its native Italy, the bank lags behind French rivals for leasing: it wrote €1.5bn of business in 2017, compared to BNP Paribas’s €1.9bn and SocGen’s €2.1bn, according to Italian leasing association Assilea.

However, UniCredit has an extensive network in Eastern Europe, which SocGen could use to strengthen its position in the region. For instance, UniCredit operates a leasing offer in former Yugoslavia and all of the Baltic republics, where SGEF has had little or no presence so far.

The Italian bank has long been struggling with a burden of non-performing loans (NPLs). In the leasing department, it sold off some €2.2bn of NPLs during 2017, mostly relating to real estate assets.

In related news, UniCredit Leasing agreed a €600m credit line with the European Investment Bank (EIB) last week, aimed at SMEs covered by the bank’s central and eastern European network. Companies with a maximum of 250 employees will be eligible for financing worth up to €12.5m.

The bank and the EIB had already agreed a facility of the same type in May last year, worth €850m.

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