UniCredit Defies Germany with Derivatives to Secure 21% Stake in Commerzbank – Reuters

By Valentina Za

Milan – Italy’s UniCredit has made a strategic move to increase its stake in Commerzbank to nearly 21%, utilizing derivative contracts while awaiting regulatory approval for a higher ownership level beyond 9.9%.

This initiative, led by UniCredit CEO Andrea Orcel, is part of a larger ambition to establish Europe’s largest banking entity, posing a significant challenge to the European Union’s ability to transcend national boundaries for global competitiveness.

Orcel’s decision follows Germany’s finance agency’s announcement last week that it would not be selling any more shares in Commerzbank, asserting that the bank’s strategy is focused on maintaining its independence.

UniCredit has expressed confidence that there is considerable potential for value creation within Commerzbank, whether operating independently or as part of UniCredit, benefiting both Germany and its broader stakeholders.

Commerzbank did not provide immediate comments on the situation.

Shares of Commerzbank declined by 0.8%, while UniCredit’s shares fell by 2%, in contrast to a 0.6% drop in the European banking sector overall.

Italy’s Foreign Minister Antonio Tajani voiced support for UniCredit’s approach, emphasizing the importance of a single European market. He challenged the notion of being pro-European merely in rhetoric, implying that action is required.

Earlier this month, Orcel surprised the German government by outbidding competitors to acquire a 4.5% stake in Commerzbank from the state, in addition to a similarly sized stake previously purchased from the market.

This unexpected move comes amid political turmoil in Germany, where the ruling coalition often faces internal disagreements and is losing political ground to the far-right Alternative for Germany party. This situation may hinder the government’s capacity to present a united front against UniCredit’s advances.

Orcel, an accomplished figure in investment banking known for overseeing major mergers, has indicated he would not proceed without a sense of welcome and that any potential acquisition would require wide consensus.

The 9% stake currently held by UniCredit establishes it as the largest private stakeholder in Commerzbank, following the German government’s approximate 12% share. Should it receive approval from the European Central Bank (ECB), UniCredit would become the primary investor.

The ECB is responsible for approving bank share ownership beyond specific thresholds—10%, 20%, 30%, and beyond. UniCredit has applied to increase its holdings to 29.9% and commenced derivative contracts to acquire an additional 11.5% of Commerzbank.

Ownership of the underlying shares linked to these derivatives will occur only after obtaining regulatory consent.

"The physical settlement under the new financial instruments can only take place after the necessary approvals have been secured," stated UniCredit.

The application has been submitted to BaFin, Germany’s financial supervisory authority. The ECB has a window of up to 60 days, which may extend to 90 days, to issue a ruling once it receives the documentation from BaFin.

Additionally, UniCredit has taken measures to hedge "the majority of its economic exposure" to Commerzbank, allowing flexibility to either maintain its stake, divest with limited downside, or expand its holdings further based on discussions with Commerzbank’s management, supervisory boards, and other stakeholders in Germany.