Italy has a banking consolidation boom. Wall Street is watching. Both facts suggest the world has run out of useful things to pay attention to.
The country's financial sector is experiencing a wave of takeover bids. Monte dei Paschi is involved. Mediobanca is involved. Generali, an insurer, is somehow also involved because European finance operates like a Italian wedding where everyone is related and nobody will explain how.
The deals connect to Europe's push to build larger banks capable of competing with U.S. rivals. This is the financial equivalent of saying you're going to start going to the gym. Everyone nods. Nobody believes you. The plan dies when someone mentions effort is required.
Here's what's actually happening: Italian banks are buying other Italian banks so they can become one larger Italian bank that will still be smaller than JPMorgan's Christmas party budget. The European Union thinks this matters because Brussels has convinced itself that three mid-sized banks merged together equals one competitive bank rather than what it actually creates, which is three management teams fighting over parking spots while Deutsche Bank continues to exist as a warning to others.
Retail traders are now Googling "how to buy Italian bank stocks" as if Monte dei Paschi needed a bailout in 2017 because its business model was too profitable. They're reading headlines about consolidation and thinking it means number goes up. It does not mean number goes up. It means bankers in Milan get to feel important at conferences.
The outcome could have implications for Europe's banking sector. It could also have implications for the price of fettuccine. Both statements are equally predictive of your portfolio's performance, and both will be forgotten by November when everyone remembers European banking M&A is just expensive PowerPoint presentations that end with the same banks doing the same sh*t under a slightly different name.
Photo by alexey turenkov on Unsplash
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