Italian banks -- having suspended international expansion during 1991 to concentrate on reinforcing their positions in the rapidly changing domestic market -- are once again identifying opportunities abroad.

Two markets in particular are emerging as targets for Italian banks: France and Eastern Europe.

"Just as U.S. banks are repositioning and becoming less regional and more national in stature, European banks are following the same formula," explains Alfonso Jozzo, joint chief executive at San Paolo Bank Holding.

"We consider France and Spain domestic markets, but there is more liberty in Europe to pursue this strategy," notes Mr. Jozzo, adding that Europe doesn't have the interstate Banking Act.

Attractions of French Market

Mr. Jozzo says that the French market has been very important for San Paolo's international expansion strategy. An alliance with Compagnie Financiere de Suez in 1987 enabled San Paolo to acquire Banque Vernes et Commerciale de Paris -- called Banque Sanpaolo since 1990 -- with branches in Paris and southern France.

San Paolo has been expanding its network in France, opening new branches in Lyon for example, to match a boom in Franco-Italian business activities, Mr. Jozzo said, adding that "Lyon is in Turn's backyard." San Paolo's network in France has grown to 50 branches.

Mr. Jozzo notes, however, that like Italy, France's plans for privatization in the banking sector have been slowed, leaving very few candidates for mergers or acquisitions.

Avant Garde Financial Markets

Banca Commerciale Italiana has also been consolidating its presence in France, acquiring the remaining shares of the Paris-based Banque Sudameris SA and merging its activities with BCI's French subsidiary.

Credito Italiano's managing director Pier Carlo Marengo said that in addition to a 20% stake in the Paris-based retail Banque Transatiantique SWA, Credito will open a full branch in Paris within a few months and -- early next year -- one in Lyon, where "there is a growing presence of Italian companies."

Opportunities in Lyon

"France is especially important to Italy because it is our second-largest commercial partner after Germany," explains Carlo Cataneo, head of the international division at Banco Popolare di Milano.

"France is also very avant garde in certain financial markets, such as the futures exchange MATIF in Paris, which was the first to launch a contract in Italian government bonds. Those two strengths make the French market very appetizing to Italian banks," he adds.

He says that BPM plans to open a subsidiary in France soon. The Milan-based bank already has full branches in New York and London.

'A Great Province

Mr. Cattaneo points out the growing importance of Lyon as well. "A few years ago, entering the French market meant opening a branch in Paris. Today, the opportunities in Lyon are even greater."

Sandro Molinari, director general of Cassa di Risparmio delle Province Lombarde, or Cariplo, says that France is indeed important. He said that Cariplo's French subsidiary Compagnie Internationale de Banque has recently opened a branch in Lyon -- an area where Italian companies are very active.

"France is a great province of a great Europe," confirms Cesare Geronzi, director general of Banco di Roma. The group has 30 branches in France and "is still growing," says Mr. Geronzi.

Caution in the East

The move into Eastern Europe is proceeding more cautiously. Italian bankers say they are very keen on the new markets that are opening up there, but that entry will be gradual.

Mr. Geronzi says that they have authorization to open offices in Moscow, Prague, and Hungary, but that they are going ahead gradually "without blaring trumpets."

"Our eyes are wide open in East Europe -- we're playing great attention to developments there," confirms Mr. Marengo of Credito Italiano. "But," he adds, "we are in no rush."

Banco Commerciale Italiana was the first Italiana bank to enter Moscow, underlines managing director Mario Arcari. Apart from a 12% stake in the International Moscow Bank, BCI also has stakes in the Central-European International Bank Ltd. of Hungary and in the International Bank in Poland Inc. He admits that now, however, "we are using a little prudence."

Windows on Development

Both Cariplo and BPM are boosting their presence in Germany to take care of growiwng business and to act as a window on developments in eastern Europe. "We are enlarging our Frankfurt office and giving it the task of being our observatory for eastern Europe," says Mr. Cartaneo at BPM.

Mr. Jozzo at San Paolo says that the eastern European countries are part of the strategic axis that forms the basis of its overall international expansion strategy to become Italy's most prominent European bank.

San Paolo entered the Hungarian market three years ago as the largest individual shareholder in Inter-Europa Bank Rt. The Turin-based bank also expects to reach an agreement in Poland soon, and is studying Czechoslovakia, Mr. Jozzo says.

"The battle between European banks for a dominant market position will not be fought on one's own territory . . . East Europe is the battlefield," predicts Mr. Jozzo at San Paolo. He says that this is one of the reasons why it will be important to maintain a sharp lookout in that area.

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