The Italian banking fund that owns Carige after a 2019 rescue has picked BPER Banca to negotiate a sale it hopes will end a seven-year crisis at the ailing lender.
Carige and bigger rival Monte dei Paschi di Siena are the two main banking headaches Italy must tackle to end a restructuring started in 2015 that has cost healthy lenders more than €10 billion.
After failing last year to sell state-owned Monte dei Paschi to heavyweight UniCredit, Italy has tabled €380m in gross tax incentives to ease Carige's disposal.
Following a meeting of its steering committee yesterday, the FITD fund that owns 80% of Carige said that BPER would have four weeks to study the target's financial data to agree on a sale no later than February 15.
Italian banks spent €600m to rescue Carige through the FITD fund, which must now pump more money into it to clinch a sale.
Suitors BPER, Credit Agricole Italia and US fund Cerberus had all offered a token €1 and asked for cash to cover restructuring and clean-up costs.
After initially demanding a €1 billion capital injection, which FITD rejected because it topped the €700m it could spend, BPER said it had cut the request to €530m.
Thanks to the tax incentives, BPER still expects the deal to have a neutral impact on its capital reserves and significantly boost earnings per share from 2023, it said.
BPER would then buy out remaining investors in Carige at €0.80 a share.
Shares in Carige closed 1% up at €0.894, having gained more than a third since mid-December, when news of interest from BPER and Credit Agricole Italia first emerged.
BPER, Italy's fifth-largest bank, was the favoured bidder, with the country's authorities keen on tie-ups between mid-tier lenders while some FITD members were wary of further expansion by Credit Agricole Italia, the largest foreign lender in the country.
The Italian arm of France's Credit Agricole last year bought small peer Creval for €1 billion and in 2017 clinched a rescue deal with FITD for three failing banks.
BPER has been steered onto an expansion path by its leading shareholder, insurer UnipolSAI, and last year boosted its assets by 40% by buying branches sold as part of Intesa Sanpaolo's takeover of UBI.
Carige would further lift BPER's assets to about €155 billion, making it Italy's fourth biggest bank and a more direct competitor to Banco BPM, the third biggest and a longstanding possible merger partner.
"The potential BPER-Carige deal would move further away the possibility of an integration between BPER and Banco BPM," Intesa Sanpaolo analysts said.
With a cost-to-income ratio of 93%, Carige would "need the full attention of management and time" to be restructured once acquired, Intesa said.
BPER worked with Rothschild, while KMPG and Deutsche Bank advised FITD.
