Banca Monte dei Paschi di Siena, the world's oldest bank and the Italian lender with the biggest hole from Europe's bank health check, may need to find a buyer to help plug a capital shortfall, a move that could prompt a round of consolidation in the industry.
The world's oldest bank, twice bailed out in the past five years, must replenish €2.1bn within nine months to meet European Central Bank requirements for capital buffers.
The Siena-based bank, which raised €5bn from shareholders this year to prepare for the test and repay some state aid, hired UBS and Citigroup to explore all strategic options.
Monte Paschi hasn't overcome the financial strain wrought on the lender when it bought a rival in 2008 and later used derivatives to cover losses, transactions that have since backfired and are being criminally probed.
A combination of Paschi, which was founded in 1472, with a competitor may now lead smaller banks that are also burdened by bad loans and have struggled to boost profit after the financial crisis to follow its lead.
"The easiest option for Monte Paschi would be a merger with another European lender interested in boosting its presence in Italy," said Carlo Alberto Carnevale Maffe, who is a professor of business strategy at Milan's Bocconi University.