Atlas Merchant Capital, Warburg Pincus, Baupost Group and Centerbridge Partners have held talks with fund officials about buying and combining Banca Popolare di Vicenza and Veneto Banca, the people said. No firm indication of interest is expected until after the summer.
Atlante, managed by asset manager Quaestio Capital Management SGR, was set up in 2016 to buy bad loans from banks and to serve as a backstop for banks raising fresh capital. Its investors include banks, insurers, banking foundations and state-controlled investment agency Cassa Depositi e Prestiti.
The Atlante fund took controlling stakes in Banca Popolare di Vicenza and Veneto Banca worth around €2.5 billion after investors shunned recent share sales by the banks. Any potential sale of the two banks to outside investors would likely involve Atlante carving out and retaining bad loans, a person involved in the talks said.
Italy’s banking sector is in upheaval from high levels of bad loans and poor profitability. The Italian government has been studying ways to provide support but must avoid falling foul of European Union rules on state aid. Bank analysts say consolidation among the country’s banks is inevitable and should eventually improve returns for lenders as costs are stripped out.
As a private fund, Atlante shouldn’t face any political hurdles in selling the banks, the person involved in the talks said. If a deal goes ahead it would be good for the Italy and “show that there is a restructuring case that can be successful”, this person said.
Apart from relative newcomer Atlas Merchant, the US funds involved in the potential deal have all made significant investments in European financial firms. Centerbridge bought Italy’s Banca Farmafactoring in 2015, and is among potential bidders for Portugal’s Novo Banco. Warburg Pincus’s European financial assets include a stake in Santander Asset Management, while Baupost Group has invested in Portuguese and Greek banks.
For Atlas Merchant, set up by Diamond after resigning as Barclays chief executive four years ago, the possible Italian deal would be its largest to date. In April, Diamond said Atlas Merchant was teaming up with Carlyle Group and other investors for a possible purchase of part of Barclays Africa . His separate venture, Atlas Mara, owns banks or bank stakes in seven African countries.
Italian banking is seen as high risk by many analysts because of its heavy load of bad loans and uncertainty around the scope for bailouts. Yet US funds and other global investors have been scouring the sector for bargains, including buying discounted portfolios of bad loans.
—Giovanni Legorano in Milan contributed to this article
Write to Margot Patrick at firstname.lastname@example.org
This story was first published by The Wall Street Journal
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