LONDON—Bob Diamond's private-equity firm Atlas Merchant Capital LLC is part of a consortium of U.S. funds exploring ways to take over two troubled Italian banks held by Italy's bank rescue fund Atlante, people familiar with the matter said Thursday.

Atlas Merchant Capital, Warburg Pincus LLC, Baupost Group LLC and Centerbridge Partners LP have held talks with fund officials about buying and combining Banca Popolare di Vicenza SpA and Veneto Banca SpA, the people said. No firm indication of interest is expected until after the summer.

Atlante, managed by asset manager Quaestio Capital Management SGR, was set up this year to buy bad loans from banks and to serve as a backstop for banks raising fresh capital. Its investors include banks, insurers, banking foundations and state-controlled investment agency Cassa Depositi e Prestiti.

The Atlante fund took controlling stakes in Banca Popolare di Vicenza and Veneto Banca worth around €2.5 billion ($2.77 billion) after investors shunned recent share sales by the banks. Any potential sale of the two banks to outside investors would likely involve Atlante carving out and retaining bad loans, a person involved in the talks said.

Italy's banking sector is in upheaval from high levels of bad loans and poor profitability. The Italian government has been studying ways to provide support but must avoid falling foul of European Union rules on state aid. Bank analysts say consolidation among the country's banks is inevitable and should eventually improve returns for lenders as costs are stripped out.

As a private fund, Atlante shouldn't face any political hurdles in selling the banks, the person involved in the talks said. If a deal goes ahead it would be good for the Italy and "show that there is a restructuring case that can be successful," this person said.

Apart from relative newcomer Atlas Merchant, the U.S. funds involved in the potential deal have all made significant investments in European financial firms. Centerbridge bought Italy's Banca Farmafactoring SpA last year, and is among potential bidders for Portugal's Novo Banco. Warburg Pincus's European financial assets include a stake in Banco Santander SA's Santander Asset Management, while Baupost Group has invested in Portuguese and Greek banks.

For Atlas Merchant, set up by Mr. Diamond after resigning as Barclays PLC chief executive four years ago, the possible Italian deal would be its largest to date. In April, Mr. Diamond said Atlas Merchant was teaming up with Carlyle Group and other investors for a possible purchase of part of Barclays Africa . His separate venture, Atlas Mara Ltd., owns banks or bank stakes in seven African countries.

Italian banking is seen as high risk by many analysts because of its heavy load of bad loans and uncertainty around the scope for bailouts. Yet U.S. funds and other global investors have been scouring the sector for bargains, including buying discounted portfolios of bad loans.

Giovanni Legorano in Milan contributed to this article.

Write to Margot Patrick at margot.patrick@wsj.com

 

(END) Dow Jones Newswires

July 14, 2016 13:15 ET (17:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
Barclays (NYSE:BCS)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Barclays Charts.
Barclays (NYSE:BCS)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Barclays Charts.