Intesa Sanpaolo bids €4.9bn for UBI Banca

Intesa Sanpaolo, Italy's biggest retail bank, has launched a €4.9bn (£4.1bn) bid to buy its smaller rival UBI Banca marking the first move in long-expected consolidation for the Italian banking sector.

The bank said it would offer 1.7 newly issued shares for each UBI share to create a joint bank with more than €1.1trn of customer assets. The bid is worth €4.25 per UBI share - or 27.6% more than the target's closing share price on Friday.

Intesa said it chose UBI, Italy's fifth-biggest bank, because it was strong in Italy's northern region and had a similar business model, reducing integration risks. The deal would form the Eurozone's seventh-biggest bank by assets with a forecast combined profit of about €6bn by 2022.

“The banking sector is heading for consolidation in the coming years," Intesa said. "It is in Intesa’s interest to reach a size that will allow it to compete [...] in Europe."

Intesa said it planned €510m of cost cuts, including €340m from shedding 5,000 jobs on a voluntary basis, if the deal is completed by the end of 2020. Italian supervisors have called on the country's banks to reduce competition, cut costs and improve profits in the fragmented sector.

To head off expected competition concerns Intesa said it had agreed to sell 400-500 branches from the combined group to another Italian bank, BPER Banca. Intesa said it had not informed UBI before announcing the offer but that the bid was not hostile.