Banco Santander, S.A. (ADR) (NYSE:SAN) and UniCredit SpA (BIT:UCG) will not merge their asset management businesses after all. The two have halted negations that have been running for close to 20months. The Italian bank alleges that the Spanish bank failed to meet regulatory requirements within a designated time frame which curtailed the possibility of working together. Another twist to the failed talks according to analysts is the uncertainty of the financial markets whose impact of the UK’s exit from EU is not known. Brexit has already set back share prices of various Europe’s asset manager.
A lot was in projection from the deal whose talks began last year April. UniCredit was aiming at reducing its headcount, but there would also have been an overall boost of €5.5 billion and €400 billion in enterprise value and assets respectively. Nevertheless, this is now a past even though the bank’s tie-up may have ended being one of Europe’s leading asset gatherers who would have been a plus for the two.
The way forward for the two financial institutions
Every agency is seeking the best market value with whatever means it has and probably the reason mergers have become the order of the day. Apparently, bank mergers have been blemished with failures for various reasons the likes of cultural differences. Speaking of its next move, UniCredit’s new chief executive Jean-Pierre Mustier says that the institution is seeking for other options given that its goal of raising its core capital base has not been met.
On the other hand, Jose Antonio Alvarez Santander CEO explained that the bank had tried the much it could to meet the regulatory requirements but its efforts failed. The bank will now lay its focus on developing Santander Asset Management as it strives to have an outstanding asset manager.
The consequences of the failed merger
As much as everyone is pointing fingers at Brexit, there were notable cultural differences between the two banks which may also have propelled the failure of the merger. It is ill-timed for Mustier who took the bank’s leadership two weeks ago and now he has to level down a birth pang that may not be recovered anytime soon.
UniCredit’s shares have plunged to record lows. Investors are fleeing the sector for fear of non-performing loans. Nonetheless, Mustier is optimistic of being able to restore investor confidence in the lender.