Better to take MPS or get married with Banco BPM? While waiting to see what decisions will be made by the CEO of Unicredit, Andrea Orcel, analysts indicate an alternative path, that is to go ahead without extraordinary operations. This is Barclays’ view which today takes stock of the Italian banking sector, reiterating its preference for Intesa Sanpaolo.
Waiting for the presentation of the new business plans, expected in the coming months, Barclays is expecting Unicredit in particular. The UK business firm believes more value can be generated from a refocusing of the stand-alone strategy rather than from hypothetical M&A scenarios (with Mps or Banco BPM).
Understanding the favorite, but also Banco BPM can amaze
Barclays reiterated the overweight rating on Intesa Sanpaolo as well as on Mediobanca, Banco Bpm and Bper. On Unicredit and Credem, the opinion is equal weight. Only underweight is on MPS.
In the medium term, the preferred stock is Intesa Sanpaolo – on which the target price is 2.8 euros – because its strong point Return on tangible equity (return on tangible equity, ROTE), an indicator that measures the rate of return on tangible, current and potential equity represents a competitive advantage and enables higher returns for shareholders. Barclays also continues to be constructive on Banco BPM for two possible ways in which the group could reshape its strategy, namely by internalizing the revenues of the product factories (bancassurance) and / or through M&A with peers.
Three reasons to be optimistic about the sector
Barclays then points out three key themes that can drive outperformance in the sector:
• Theme 1: All Italian banks issue a ROTE lower than the cost of capital; however, in the case of Intesa, we maintain that with the next business plan the gap can be filled, with ad hoc actions to increase commissions, reduce costs and further optimize capital levels. We think this can be powerful in terms of growing confidence in the sustainability of its dividend policy.
• Theme 2: Revenue from commissions they can continue to surprise in the short and medium term. This not only refers to wealth management, but also to traditional bank fees. All banks will benefit from this.
• Theme 3: The regulator asks banks to use excess capital with the help of technology to improve long-term efficiency and change business models that have not yet made sustainable profits. “So overall, we don’t expect substantial cost reductions (other than specific M&A situations or synergies). On top, we see risks of cost increases due to inflation ”. In this sense, Barclays believes that banks like Intesa, with “positive / growing operating jaws”, appear better positioned.
Consensus analysts say buy on Intesa, but the upside is limited
In general, among the analysts who cover the Intesa Sanpaolo stock more than two thirds (67.7%) say buy, 32.3% instead is hold and no one says sell. The average target price is € 2.71, 8% above the stock’s current levels.
Since the beginning of the year, Intesa has recorded a consistent + 32%, which however does not place it in the top ten of the performers of the Ftse Mib, which in the head sees just two banks paired, Unicredit and Banco BPM, with approximately + 56%.