UniCredit CEO Discusses Merger with Commerzbank After Share Acquisition, Sources Say – Reuters

By John O’Donnell, Valentina Za, and Tom Sims

FRANKFURT/MILAN – The CEO of UniCredit has initiated discussions with Commerzbank regarding potential merger talks, following the Italian bank’s acquisition of a 9% stake in the German lender, according to sources familiar with the situation. This move has raised fresh speculation about consolidation within Europe’s fragmented banking sector.

UniCredit’s CEO, Andrea Orcel, has sparked conversation about a possible larger acquisition of Commerzbank, though such a move could face significant opposition from political entities and unions in Germany, along with some internal resistance at Commerzbank itself.

By purchasing the stake, UniCredit has positioned itself as one of Commerzbank’s largest shareholders, marking another attempt to increase the Italian bank’s presence in Germany amid previous efforts to acquire its rival. UniCredit invested around 700 million euros for part of the stake by outbidding competitors in a government-led share sale, aiming to reduce its own stake in Commerzbank.

A spokesperson for Commerzbank did not confirm or deny the merger discussions, while the German bank is set to convene a board meeting to examine the situation further. They have also enlisted Goldman Sachs for guidance on available options.

Analysts at KBW have suggested that a complete acquisition of Commerzbank would be financially and strategically advantageous for UniCredit. Since Orcel took the helm in April 2021, UniCredit’s share price has increased significantly, while Commerzbank’s market value remains notably lower.

Following the news, Commerzbank’s shares saw a substantial rise, while UniCredit’s stock experienced a modest increase. Orcel’s strategy could potentially motivate other European banks to reassess their own positions, particularly Deutsche Bank, which has remained silent on the developments.

As the German government retains a stake in Commerzbank, it is likely to pause any further sales to evaluate the implications of this new development. A member of Commerzbank’s supervisory board has voiced strong opposition to the idea of a takeover, citing concerns over potential job cuts and centralized decision-making being shifted to Italy.

Commerzbank’s CEO has downplayed the likelihood of significant mergers and announced plans to step down upon the completion of his term next year. While there has been a longstanding desire among European regulators to encourage consolidation through cross-border mergers, various political challenges have historically hindered such initiatives.

Orcel, a seasoned dealmaker, has indicated his openness to potential mergers and acquisitions for UniCredit, contingent upon meeting specific financial criteria. A shareholder in UniCredit labeled the move concerning Commerzbank as strategic and opportunistic, emphasizing the bank’s strong capital position.

Previously, the German state held a significant stake in Commerzbank due to a rescue package during the financial crisis, and has recently begun to reduce its ownership. There has been reluctance in German circles to allow a foreign bank to acquire Commerzbank, as it might bolster a rival against Deutsche Bank.

Earlier discussions between Orcel and Commerzbank’s leadership occurred in 2022, prior to the onset of the Ukraine conflict, and past efforts to acquire Commerzbank led by Orcel’s predecessor faced similar political hurdles.