It’s been a buoyant time for bank stocks and European governments have taken advantage. Over the past few months, they’ve offloaded billions of dollars of shares they bought to backstop the sector during its period of crisis. From the UK to Greece, banks are being returned to private hands:

• This week, NatWest Group announced a buyback of £1 billion of its own shares from the UK Government, reducing the state’s stake to around 11.4%. Government ownership has fallen from 38% since the end of 2023. 

• In October, the Dutch government launched a trading plan to sell down its stake in ABN AMRO from 40.5% to 30%.

• As discussed here in September, in Crossing Borders: The Revival of European Bank M&A, the German government sold 4.5% of Commerzbank – at a premium to market prices – retaining a 12% position.

• The Irish government has reduced its holding in AIB Group from 71% at the start of 2022 to just under 21% following its latest sale in September. The bank’s CEO reckons the government could be fully out by next year.

• In October, the Greek bailout fund sold a final 10% stake in National Bank of Greece, transferring its remaining 8.4% to the country’s sovereign wealth fund. Earlier in the year, it fully exited Piraeus Bank after placing a 27% stake. 

All told, European governments have sold around €14 billion of shares of bailed out banks this year – the most since the end of the financial crisis. This week, the Italian government contributed to the flurry, selling a 15% stake in Monte dei Paschi di Siena. It wasn’t the largest sale, nor the last (the government retains an 11% holding) but it could be the most symbolic.

Like at Commerzbank, the transaction took place at a premium to market price and rekindled the prospect of M&A: One of the buyers was rival Banco BPM. But Monte dei Paschi di Siena was also considered by many to be unredeemable. The oldest bank in the world, headquartered in one of its most picturesque spots, it was felled by loss, scandal and mismanagement. Over its 552 years as a financial institution (it was founded in 1472!) it has come close to failure on many occasions. As recently as 2021, one of Italy’s largest banks, Unicredit, refused to take it on.

Now, profits are up, it has accumulated capital, and M&A is a prospect. Last year, it reported underlying pre-tax profit of €1.3 billion, a much stronger outcome than the €900 million it once targeted for 2026. Third quarter earnings, released last week, beat expectations leading to full-year guidance being raised. And with the government’s stake reduced, the bank is back on track. “We are in the fast lane, boosted by our new business plan, with the conviction that we can go even faster,” said CEO Luigi Lovaglio, a turnaround specialist appointed in 2022, on his earnings call. 

To delve into (some) of the history of this bank – which was making loans two decades before Christopher Columbus sailed west – and find out how it’s getting on now, read on...