With bank stocks trashed around Europe, it is tempting to picture the McKinsey-trained chief executives of UniCredit and Intesa Sanpaolo, the biggest Italian banks, running takeover simulations late into the night. Both banks have done pretty well over the credit crunch and have vaulted up the size rankings thanks to a bout of domestic consolidation, cheered on by the Bank of Italy. UniCredit and Intesa are Europe's third and fifth biggest banks by market capitalisation, seemingly well placed to lead another round of consolidation.

The first quarter reporting season underlined the banks' relative strengths. Both are more or less free of subprime nasties, with big retail franchises in economies outside Italy where rising penetration of financial products offers decent structural growth. Capital positions are not the strongest in Europe, but UniCredit and Intesa should meet their targeted core Tier 1 ratios of at least 6 per cent by the year's end and have disposal options if necessary.