- UniCredit is sparking acquisition dreams with Commerzbank joining the scene.
Unicredit's Investment in Commerzbank Fueling Merger Speculations
Italian banking colossus Unicredit has stirred up merger whispers following its participation in Commerzbank's announced stock sale. Unicredit procured shares from the German government and also invested in the open market, as per declarations in Milan. Currently, Italians hold approximately 9% of Commerzbank's shares.
Unicredit leaves room for further growth, aiming for regulatory approval to raise its stake beyond 9.9%. Immediately after trading started, Commerzbank's shares jumped over 15%.
Meanwhile, Commerzbank has initiated the process of finding a replacement for CEO Manfred Knof, whose contract will not be renewed past 2025.
Italians Gain Control over Commerzbank Shares
Unicredit obtained approximately half of the 9% stake from the German state. The government offloaded around 4.5% of its shareholding to Italians as part of last week's announced partial divestment. Unicredit went above the shares' Tuesday evening market value to acquire the shares, as reported by Frankfurt's financial agency. All offered shares were exclusively allocated to Unicredit due to "obvious overbids compared to other offers."
The allocation price of 13.20 euros per share was 60 cents, or nearly 5%, above Tuesday's closing price on the Xetra trading platform. Such placements usually involve discounts. The government pocketed over 700 million euros by selling around 53 million shares, shrinking its stake to 12%, yet retaining its position as Commerzbank's largest shareholder.
Unicredit Establishes Foothold in German Retail Banking
With a 9% stake, Unicredit now ranks as the second-largest shareholder. Unicredit ventured into the German banking arena nearly 20 years ago, purchasing Hypovereinsbank (HVB) for approximately 15 billion euros in 2005. Since then, it has maintained a strong presence in German retail banking, although it has notably reduced its workforce and branch network since the acquisition.
Unicredit and Commerzbank suffered significant losses on the stock market during the 2008/2009 financial crisis and the Eurozone debt crisis at the start of the decade. Both banks suffered over 90% stock depreciations at their lowest points. However, their situations have remarkably improved since, driven partly by higher interest rates. Unicredit's recovery has been especially notable.
Now valued at nearly 60 billion euros, Unicredit has the financial capacity to absorb Commerzbank, whose market capitalization is around 15 billion euros, or roughly a quarter of Unicredit's. Takeover rumors involving Italians have been consistent over the past year.
Commerzbank Hunts for New CEO
Meanwhile, Commerzbank must focus on identifying a successor to Knof, who will retire at the end of 2025. He has been at the helm since 2021, implementing stringent cost-cutting measures: thousands of jobs were eliminated, and the branch network substantially reduced. Through restructuring and rising interest rates, Commerzbank successfully reversed its fortunes.
"Without Manfred Knof, Commerzbank would not be as prominent as it is among European banks today," stated Supervisory Board Chairman Weidmann. "Thanks to his decisive leadership, the bank was swiftly rehabilitated, its business model was clearly defined, and it was aligned with sustainability."
Last year, the Commerzbank's competitor, Deutsche Bank, posted a record profit of around 2.2 billion euros. The federal government plans to gradually withdraw from Commerzbank, which it saved from collapse during the financial crisis with billions of euros in taxpayer money.
The most likely candidate for succession is Commerzbank's Chief Financial Officer and Vice-Chairman of the Board, Bettina Orlopp (54). She has long been rumored to harbor ambitions for the top position. The issue of who will lead the Frankfurt bank in the future has recently stirred up unrest within the institution, and rumors of internal power struggles have surfaced.
The acquisition of shares by Unicredit from the German government has further fueled discussions about a potential merger between the two banks, as the State of the Union address is an opportunity for leaders to share their plans and visions for the future of their nations.
With its increased stake in Commerzbank, Unicredit is strategically positioning itself for potential advancements, a topic often discussed in the State of the Union address as nations look to strengthen their economic positions.
