Banca Monte dei Paschi di Siena, the world's oldest bank, is having a year that would exhaust a much younger institution. The bank got its start in Siena in 1472 as a pawnshop, and has since fired and rehired its own CEO, absorbed a rival, and now faces a hostile takeover attempt.
Monte Paschi began as a pawnshop in Siena in 1472. It has survived wars, plagues, and financial panics of every size. But the last few decades have tested it harder than almost anything in its long run.
A bad acquisition before the 2008 global financial crisis nearly destroyed the bank. It needed a government rescue in 2009, and the years that followed brought one scandal after another. By 2017, the Italian government had to nationalize the bank just to keep it alive. For a while, it was the poster child for how badly a bank can be managed.
That is what makes the last few years so surprising. The bank clawed its way back to solid profits, and its market value has grown steadily over the past half decade. That success let the Italian government sell down its stake, which put the bank back into play as a takeover target.
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The hostile bid that the bank is facing came from Intesa, which is a serious threat to Monte dei Paschi's independence. Rather than wait for that offer to play out, the bank chose to go on offense.
On Friday the bank offered to buy Banco BPM and Banca Generali for €34 billion combined, which works out to about $40 billion. That's a huge amount of money for a bank that was on its knees a decade ago. That amount would double the bank's market value and block the hostile takeover attempt from Intesa.
The deal is a classic defense move. When someone is trying to buy your company, a smart move is to get bigger. Buying two competitors at once does exactly that, and the bank's CEO, Luigi Lovaglio, is the one leading the charge.
For regular investors, the key question is not whether Monte dei Paschi wins this fight. It is what the fight says about the broader banking market.
A bank that was a national embarrassment in 2009 is now large enough to buy two rivals in a single week. That kind of turnaround does not happen without serious changes in how the bank runs. The Italian government's slow exit from ownership has also opened the door to more dealmaking in the region, and this move could set off a wave of similar consolidation.
The risks are real, though. The bank is taking on a lot of new complexity while it is still integrating its previous purchase of Mediobanca. Adding two more companies to the mix makes that job much harder.
The bottom line: the oldest bank in the world just bet its future on getting bigger. For investors watching banking from outside, that bet is a clear signal that the era of quiet, careful banks is over. The players are making their moves, and Monte dei Paschi is making the biggest one of all.
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