German Chancellor Olaf Scholz attends Startup Germany Summit, in Berlin, on Sept. 17.Liesa Johannssen/Reuters
German Chancellor Olaf Scholz slammed as “an unfriendly attack” UniCredit’s move to become the biggest investor in rival Commerzbank with a potential 21-per-cent stake, marking growing hostility toward the Italian bank.
The German establishment’s ire toward UniCredit using derivatives to more than double its potential stake before obtaining regulatory clearance for an actual holding of more than 9.9 per cent piles pressure on European Central Bank supervisors.
Led by German academic Claudia Buch, they are now called to rule on UniCredit’s request to buy up to 29.9 per cent of Commerzbank.
“Unfriendly attacks, hostile takeovers are not a good thing for banks, and that is why the German government has clearly positioned itself in this direction,” Mr. Scholz said on the sidelines of an event in New York.
His words sent Commerzbank shares down 5.9 per cent as investors reassessed the chances of a full takeover. UniCredit closed down 3.3 per cent.
UniCredit chief executive officer Andrea Orcel’s bold attempt to build Europe’s biggest bank has become a test of the bloc’s resolve to overcome national borders to retain global relevance.
After unveiling a 9-per-cent stake in Commerzbank this month, Mr. Orcel has said he would seek a tie-up if he could garner support, adding he could also just hold on to the stake, or sell it.
Friedrich Merz, the Christian Democrat opposition leader whom many see as Germany’s next chancellor, described Mr. Orcel’s tactics as “amateur” and a takeover as a “disaster for Germany’s banking market,” pointing to the precedent of HVB.
UniCredit, which has up to €6.5-billion ($9.7-billion) in capital it could use for acquisitions, bought Bavarian bank HVB in 2005. That bank’s business, though much smaller, is more profitable than Commerzbank’s after hefty staff cuts over the years.
“The ball is firmly in the ECB’s court. If they approve the increase, UniCredit will control enough to lead the game,” academic and former ECB supervisor Ignazio Angeloni said.
“UniCredit could also just fold HVB into Commerzbank and have a large stake in a German bank. It’s not ideal, we’re still far from a ‘European JPM,’ but it’s a first step in the right direction for Europe,” he added.
Compared with U.S. peers such as JP Morgan, European lenders are lagging in both size and value.
UniCredit’s move comes after Germany’s finance agency said Friday it would not sell any more Commerzbank shares for now, with the bank’s strategy “geared towards independence.”
Germany still owns 12 per cent of Commerzbank. UniCredit is seeking ECB approval to increase its Commerzbank holding just below the 30 per cent that triggers a mandatory takeover under German corporate laws.
UniCredit has said it would only take possession of the Commerzbank shares linked to the derivative contracts it used to increase its potential holding if it secured ECB approval.
The ECB has up to 60 days to rule, which can be extended to 90 days.
Acknowledging UniCredit’s stake building on Monday, Commerzbank said it would “always examine strategic options responsibly in the interests of its stakeholders.”
Shares in Commerzbank have gained around 20 per cent since UniCredit emerged as the biggest private investor after the German state, lifting Commerzbank’s market value to around a third of UniCredit’s more than €60-billion.
“The situation has taken an unexpected turn, as the market was expecting a slow timeline and no action in the short term, as well as … a ‘friendly development,’” Citi analysts said.
Germany’s Verdi union opposed the development and vowed to “fight with all means for independence.”
Commerzbank, with more than 25,000 business customers, almost a third of German foreign-trade payments and more than 42,000 staff, is a linchpin of the German economy.
Unions fear job losses as German banks have much higher labour costs than Italian peers.
UniCredit defended the merits of a combination after unveiling the higher stake, which sources said it had built with help from Barclays.
“UniCredit believes that there is substantial value that can be unlocked within Commerzbank, either stand-alone or within UniCredit, for the benefit of Germany and the bank’s wider stakeholders,” it said in a statement.
Italian Foreign Minister Antonio Tajani defended UniCredit’s approach.
“Being pro-European only in words leaves something to be desired,” Mr. Tajani said.
Mr. Orcel first blindsided the German government when UniCredit outbid rivals in a tender to buy 4.5 per cent of Commerzbank from the state this month, having already amassed a similar-sized stake on the market.
The escalation comes at a time of political upheaval in Germany, where the three political parties governing the country frequently clash and continue to lose ground to the ultra-conservative Alternative for Germany (AfD) party.
This disarray could make it harder for the government to forge a strong response to the unwanted Italian advance.
“UniCredit now has a better starting position with this large share package. … It creates a certain momentum,” said Michael Grote, a professor at the Frankfurt School of Finance & Management.