Germany decries UniCredit bid for Commerzbank ‘unfriendly’ – DW – 09/24/2024 | EUROtoday

Why has UniCredit purchased a stake in Commerzbank?

UniCredit stunned markets two weeks in the past by revealing it had acquired a 9% stake in Commerzbank for about €700 million ($771.3 million), after outbidding different hopefuls.

On Monday, Italy’s second-biggest lender caught monetary consultants off guard once more when it introduced it had taken one other 11.5% by means of monetary devices, bringing its whole possession to round 21%. In addition, UniCredit stated it had requested European Central Bank (ECB) permission to lift its stake to 29.9% — simply wanting the 30% threshold that might require it to make a public provide for the complete financial institution.

In an announcement, UniCredit additionally stated it had “full flexibility and optionality to either retain its shareholding, sell its participation or increase the stake further.”
Earlier this month, the German authorities, which bailed out Commerzbank after the 2008/09 monetary disaster by taking a 16.5% stake, tipped off potential consumers that it needed to promote a part of its holdings within the nation’s second-biggest lender.

Although the German state stays Commerzbank’s greatest shareholder, the sale of simply over 53 million shares reduces the federal government’s stake to 12%.

UniCredit is now additionally one in every of Commerzbank’s greatest shareholders, and the share buy paves the way in which for a possible takeover. UniCredit chief government Andrea Orcel advised Bloomberg on Thursday (September 19) that he was contemplating that choice.

Any takeover would create an entity that might surpass Deutsche Bank as Germany’s greatest lender. Deutsche Bank explored a merger with Commerzbank in 2019, however it ended with out settlement.

Bloomberg additionally reported that UniCredit is believed to have €10 billion in money for potential acquisitions. However, monetary market laws stop Berlin from promoting any additional stake in Commerzbank for the subsequent three months.

What’s been the response in Germany?

German Chancellor Olaf Scholz on Monday issued a pointy warning to UniCredit to chorus from “unfriendly” assaults.”

“Hostile takeovers are not a good thing for banks, which is why the German government has taken a clear position here and made it very clear that we do not consider this to be an appropriate course of action,” Chancellor Olaf Scholz advised reporters on the sidelines of a go to to the United Nations in New York. Commerzbank was a lender that “operates successfully” and performs a key function in serving to the German economic system and its small- and medium-sized firms entry mandatory funding, he added.

A German finance ministry official advised information company AFP on Tuesday that Berlin had “communicated” to UniCredit that they might “not support a takeover” and, as a substitute would “support Commerzbank’s strategy of independence.”

Unions have warned a merger could be dangerous for industrial shoppers and for jobs. Verdi, the companies sector union, referred to as on the German authorities to “oppose” a merger and to not promote additional shares to UniCredit.

Commerzbank works council head Uwe Tschaege stated in a statment that employees representatives have been “astounded and angry” concerning the conduct of UniCredit CEO Andrea Orcel. “He is not interested in what the government or Commerzbank says, this is not a friendly act. The mood here is even more negative than before.”

Commerzbank is one in every of Germany’s few main privately owned banks and a giant lender to the nation’s so-called Mittelstand, or medium-sized firms, that are the spine of the German economic system.

Some lawmakers and enterprise leaders assume a tie-up between UniCredit and Commerzbank could be unwelcome competitors for Deutsche Bank, which was weakened by the monetary disaster and the eurozone debt disaster however averted a German authorities bailout.

Commerzbank’s administration board is convening for a technique assembly close to Frankfurt on Main, Germany, the place it’s presenting its imaginative and prescient for the long run to the financial institution’s supervisory board. But UniCredit’s transfer is anticipated to dominate the agenda of the gathering.

What is UniCredit and why is its CEO Andrea Orcel so key?

UniCredit was shaped in 1998 from the merger of a number of Italian banking teams, together with UniCredito and Credito Italiano. It has since acquired a number of different Italian and European banks. It is headquartered in Milan.

UniCredit is the world’s thirty fourth largest lender by belongings and is taken into account a systemically essential financial institution — whose failure would possibly set off a monetary disaster.

CEO Andrea Orcel is named one in every of Europe’s most skilled dealmakers. He is a controversial determine — typically criticized for his abrasive administration fashion.

Orcel orchestrated the merger that created UniCredit, then carried out an analogous maneuver in Spain that created BBVA and helped Banco Santander to purchase the UK’s Abbey National.

Just earlier than the monetary disaster, he was headhunted by the Royal Bank of Scotland (RBS) to assist it purchase Dutch lender ABN Amro. The UK authorities was later compelled to bail out RBS because of the credit score crunch.

In 2018, Orcel was tapped for the CEO function of Banco Santander, however the provide was rescinded because the Spanish lender could not meet his pay calls for. He sued Santander, and in 2021, he was awarded €68 million in compensation.

UniCredit’s share worth has quadrupled since Orcel’s arrival as CEO in April 2021, valuing the lender at €59 billion ($65 billion), far greater than Commerzbank’s €18 billion.

What would a takeover imply for banking in Europe?

Unicredit’s stake buy in Commerzbank has reignited hypothesis about consolidation in Europe’s fragmented financial institution sector.

European regulators have lengthy favored decreasing the variety of banking gamers because of the sector’s low profitability. They may embrace a number of Italian lenders, France’s Societe Generale, Portugal’s Banco Comercial Portugues, and the UK’s Standard Chartered, Bloomberg reported Thursday, citing JP Morgan analyst Kian Abouhossein.

In its assertion on Monday, UniCredit cited a latest report on European competitiveness introduced by former ECB President Mario Draghi, arguing that the continent wants the banking consolidation that the potential takeover bid represents.

“UniCredit believes that there is substantial value that can be unlocked within Commerzbank, either stand-alone or within UniCredit, for the benefit of Germany and the bank’s wider stakeholders,” it added.

However, banking executives say cross-border mergers are virtually unimaginable at current as a result of fragmented markets and tight regulation.

This article, initially printed on September 16, has been up to date to mirror the newest developments concerning UniCredit’s transfer to extend its stake in Commerzbank.

Edited by: Ashutosh Pandey