UniCredit Is Said to Have Shown Interest in Buying Commerzbank

  • Executives are said to have talked with German officials
  • Deal unlikely in short term as both banks are restructuring

UniCredit SpA executives have held discussions with German officials about a potential combination with Commerzbank AG once the lenders’ restructuring is complete, according to a person with knowledge of the talks.

A transaction is unlikely in the short term because both banks are cutting jobs and selling assets to restore profitability, said people familiar with UniCredit’s thinking, asking not to be identified because the discussions are private. Contacts are at an early stage for what would probably be an all-share deal, Reuters reported Wednesday.

A combination of Italy’s biggest bank and Germany’s second-largest listed lender would create a top European firm with more than 1.3 trillion euros ($1.6 trillion) of assets. Commerzbank would give UniCredit greater access to small and medium-sized companies, the backbone of Europe’s largest economy, while providing the opportunity to cut costs across the consumer businesses. A deal would probably need the support of the German government, which still retains more than 15 percent of Commerzbank after a bailout in 2009.

“A purchase could boost UniCredit’s bottom line, even if it paid a premium of about 35 percent,” Hugo Cruz, an analyst at Keefe Bruyette & Woods, wrote in a note to clients. However, both banks are at the beginning of their restructuring plans, so it seems early for them to be thinking about merger plans, and a deal would boost UniCredit’s value only if synergies were high, he wrote.

Seeking Growth

UniCredit doesn’t comment on press speculation, said a spokesman for the lender. UniCredit announced a 2019 transformation plan last year based on organic growth, he said. A spokesman for Commerzbank declined to comment.

The German finance ministry said its position on Commerzbank hasn’t changed and there are currently “no negotiations” about the sale of its stake. “We are not under time pressure,” it said in a statement to Bloomberg. “We want to achieve a good economic result for the taxpayer.”

After years of restructuring and regulatory reform in the aftermath of the financial crisis, European lenders including UniCredit are beginning to consider potential acquisitions again to push growth, and Commerzbank is a potential target for those firms, according to people familiar with the deliberations.

The German-rescued bank is in the midst of a turnaround plan that has already attracted the interest of Stephen Feinberg’s Cerberus Capital, which in July disclosed owning a 5 percent stake in the lender, making it the second-biggest shareholder after the German government.

Mustier’s Options

Germany is among Europe’s most competitive markets for consumer banking. Large deposit holdings have increased the pain of negative interest rates, while strict labor laws have bloated costs and intense competition is eating into earnings.

UniCredit Chief Executive Officer Jean Pierre Mustier earlier this month said all options for growth are open after 2019 and may include acquisitions. After taking over in July 2016, Mustier embarked on a reorganization, selling of non-core businesses, cutting jobs and offloading bad debt to boost capital and strengthen finances.

Mustier has reduced the bank’s presence to 14 European nations, including Germany, where UniCredit acquired HypoVereinsbank in 2005. Now operating as UniCredit Bank AG, HVB has shrunk considerably in recent years as part of the bank’s deleveraging plan. The unit focuses on private clients, business and corporate banking, offering a comprehensive range of financial services.

“A merger with a German player like Commerzbank may generate opportunities for cost synergies deriving from the integration with UniCredit’s HVB and revenue synergies in corporate banking,” Manuela Meroni, an analyst at Banca IMI, wrote in a report.

— With assistance by Rainer Buergin, and Birgit Jennen

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