Mediobanca said on Thursday CheBanca! would buy 89 branches with 220,000 clients, residential mortgage loans worth 2.9 billion euros ($3.1 billion) and 620 staff.
The sale marks part of plans by Britain’s third biggest bank to shed continental European retail banking operations as part of its retreat from businesses that are unprofitable or lack scale.
Reuters reported on Wednesday the deal was imminent.
Barclays is likely to be left with more than 10 billion pounds – or 14 billion euros – of Italian mortgages on its books, which it is trying to sell. It had 13.5 billion pounds of Italian residential mortgages at the start of the year.
The bank said last year it would sell most of its continental European retail banking operations. The Italian sale will reduce Barclays’ risk-weighted assets by about 800 million pounds and result in a small decrease in its capital ratio. It will book the loss this quarter.
Barclays has already sold retail banking operations in Spain and Portugal and is seeking to sell in France. Other banks are also pulling back from Italy, including Deutsche Bank .
The Italian business is estimated to have been loss-making and Barclays will refinance the business with 237 million euros before passing it to CheBanca!.
The deal will have a 20-basis point negative impact on Mediobanca’s capital, which the bank said would be gradually recovered from earnings.
“The fact that (Barclays’) management is comfortable agreeing to a capital dilutive disposal, combined with the group’s recent success in passing the latest Bank of England stress testing exercise, suggests to us that market concerns about the bank’s current capitalisation and the potential need to issue fresh equity to bolster this are very much overdone,” Gary Greenwood, analyst at Shore Capital, said.
Barclays shares were up 0.6 percent and Mediobanca shares were up 0.7 percent by 0850 GMT.
Barclays said it would continue to operate investment banking and corporate banking services in Italy, and continue to manage its remaining retail mortgage portfolio. It is attempting to parcel those loans up and sell them to investors, including private equity firms.
“This transaction is further evidence of the re-shaping of Barclays group to focus on our core businesses,” Jes Staley, who started as Barclays chief executive on Tuesday, said.
His aim is to improve the bank’s profitability by cutting costs and shedding underperforming businesses.
The bank is trying to reduce its ‘non-core’ assets, or businesses it no longer wants, to about 20 billion pounds by the end of 2017, from 55 billion pounds at the end of September.
($1 = 0.6695 pounds) ($1 = 0.6700 pounds) (Additional reporting by Steve Slater; Editing by Mark Potter and Jane Merriman)