In another deal prompted by the creation of the euro, ABN Amro said Friday that it would buy a minority stake in the beleaguered Banca di Roma for $717 million in cash.
The pact to buy 8.75% of Italy's fourth-largest bank is the latest in a flurry of cross-border deals between European banks. The transaction is expected to close July 1.
KBC of Belgium, Deutsche Bank of Germany, and Banco Bilbao Vizcaya of Spain are among those that have announced similar plans. Just Thursday, KBC said it would buy an 8% stake in Credit Commerciale de France.
The advent of a single currency, combined with rising competition, has forced many banks to rethink their strategies, said ABN Amro Holding's chairman, Jan Kalff, in an interview in Chicago on Friday.
Though the merger trend is well under way in the United States, "this process has just started" in Europe, Mr. Kalff said. "There is a wave of consolidation, and it will go on for a number of years."
The $465 billion-asset banking company, headquartered in Amsterdam, has been an eager acquirer for years. Now the world's 10th-largest bank, it has been helped along by acquisitions in the United States, South America, and Asia.
Mr. Kalff said that Amro has long wanted an Italian base, and that Italy could become the Dutch banking company's second European home. "It's a large country, it's still not that well developed in terms of banking, and there is enormous potential for the Italian banks to increase their profitability," he said.
Analysts said the Dutch bank is diving right into the Continental fray.
"ABN Amro has definitely embarked on a cross-border binge," said Mark Hoge, a London-based analyst with Credit Suisse First Boston.
Although Amro recently completed large acquisitions in Brazil and Thailand, it was rebuffed twice last year in Europe. Bids for France's Compagnie Financiere Credit Industriel et Commercial and Belgium's Generale de Banque failed because of political opposition in both countries.
Under the terms of Friday's agreement, Amro would join a core group of Banca di Roma shareholders and would benefit from the Italian bank's wide distribution network. Banca di Roma, which has $86 billion of assets, has 1,300 branches in Italy.
In return, the Dutch bank offers Banca di Roma worldwide exposure for its products through Amro's global system of 3,500 offices.
In addition, Amro has agreed to arrange a convertible bond issue for another Italian bank in which Banca di Roma holds a majority share.
Amro already holds a small stake-less than 1%-in Antoniana Popolare Veneta, a $22 billion-asset bank based in Padua. Mr. Kalff said the Dutch bank would probably increase its holdings in Antoniana, but not in Banca di Roma.
"We are happy with the stake, and the commercial relationship we are building up," he said.
Analysts said the deal clearly gives ABN Amro a strong platform to create a banking operation in Italy. But, they added, it remains uncertain how much the Dutch bank would gain in revenues.
"Yes, this gives them a bridgehead into the Italian market and gives them access to Italy's fourth-largest bank," Mr. Hoge said. But "Banca di Roma is definitely not one of the quality players and was not the ideal partner."
Mr. Kalff acknowledged that Banca di Roma has had credit problems.
"That has been a concern. We studied this very closely, of course, but at the same time it's an enormous opportunity," Mr. Kalff said. "If you buy into a situation early, you can help to increase the profitability of that bank and you can enjoy the future returns."
The agreement is expected to have a slightly positive effect on ABN Amro's earnings per share in 1999 and would increasingly add to results thereafter, the bank said.
Analysts said they expect more cross-border consolidation in Europe in the near term, especially between larger institutions like ABN Amro and midsize banks that are afraid to go it alone.
"Banks are laying out their cards and staking out their positions," said Matthew Czepliewicz, a banking analyst with Salomon Smith Barney in London.
The question banks are pondering, Mr. Kalff said, is: "Are they big enough or are they too local to survive in the European market? Many came to the conclusion that they are probably not big enough."
Mr. Czepliewicz and others noted that Italy may now become a battleground for more banking mergers.
"The Italian market is still highly fragmented and ready for massive consolidation," he said.