UniCredit gets ECB nod on Commerzbank stake, but delays merger decision

MILAN: Italian banking giant UniCredit said on Friday it had secured approval from the European Central Bank to up its stake in Commerzbank, but warned there were still hurdles ahead before a possible takeover of its German rival.

The ECB, which supervises the banking system in the European Union’s shared currency zone, agreed that the Italian lender could buy up to 29.9 per cent of Commerzbank, UniCredit said in a statement.

Yet the bank said it would take longer than initially expected to make a decision on a potential takeover, which both Commerzbank and Berlin oppose, with the timeline “now likely to extend well beyond the end of 2025”.

Commerzbank has vowed to fight any takeover, and UniCredit’s approach has angered German politicians, including outgoing Chancellor Olaf Scholz and his likely successor, Friedrich Merz, whose conservatives won elections last month.

UniCredit, Italy’s second largest bank, said Friday it was “awaiting the opportunity to initiate a constructive dialogue with the new German government once formed”.

The saga began in September when UniCredit revealed it had built up a stake in its rival, triggering talk that chief executive Andrea Orcel wanted to push for an ambitious pan-European banking merger.

UniCredit has since boosted its holding in Germany’s second-biggest bank to around 28 per cent, 18.5 per cent of which is held through derivatives, a form of financial contract.A spokeswoman for the German government said the ECB decision did not change the position of Berlin, which supports Commerzbank’s autonomy.

“The government has also repeatedly reiterated its rejection of a haphazard and hostile approach, and considers that hostile takeovers in the banking sector are not appropriate,” she said.

Still many factors

Commerzbank also said the ECB’s green light on Friday “does not change the fundamental situation: UniCredit continues to be a shareholder of Commerzbank”.

“We are convinced of our strategy, which aims for profitable growth and value increase, and we are focusing on its successful implementation,” it said. Last month, Commerzbank announced it planned to cut about 3,900 jobs -- around 10 per cent of its workforce -- and hiked its financial targets, in a bid to boost its share price and bolster its defences against its Italian suitor.

The job cuts, to be implemented by 2028, come after the lender booked a record profit in 2024. UniCredit on Friday welcomed “some positive change at Commerzbank, which, together with the recent more optimistic view on German macro (economy), has driven a substantial increase in the bank share price”.

Commerzbank’s shares have almost doubled in price since UniCredit’s move in September. “However, only significant time will reveal if the plan is executable and hence determine whether such price appreciation is justified and sustainable,” the Italian bank said.

UniCredit said the ECB authorisation underscored its own “financial strength and regulatory compliance” but said there were “still many factors” that will determine its plans on Commerzbank.

“Several further approvals are still required before the around 18.5 per cent shares held through derivatives can be converted into physical shares, including from the Germany Federal Cartel Office,” it said. Orcel said in January he would not rush a takeover, and was willing to walk away, but would wait until the outcome of Germany’s elections.

Berlin still holds a 12-per cent stake in the lender, the legacy of a government bailout during the 2008 global financial crisis. Merz, who is in talks to form a coalition government after the February vote, described a possible bid for Commerzbank as “hostile” in an interview with The Economist magazine last month. However, some EU policymakers have backed the idea of a tie-up, saying it would create a heavyweight better able to compete internationally. —News Desk