The emblem of German financial institution Commerzbank seen on a department workplace close to the Commerzbank Tower in Frankfurt.
Daniel Roland | Afp | Getty Pictures
Two months since UniCredit performed its opening transfer to woo German lender Commerzbank, the lenders flaunted their monetary power as considered one of Europe’s largest banking mergers nonetheless hangs in stability.
Each banks reported third-quarter outcomes on Wednesday, with UniCredit posting an 8% year-on-year hike in internet revenue to 2.5 billion euros ($2.25 billion), in contrast with a Reuters-reported 2.27-billion euro forecast. It raised its full-year internet revenue steering to above 9 billion euros, from a earlier outlook of 8.5 billion euros.
For its half, Commerzbank revealed a 6.2% drop in internet revenue to 642 million euros within the third quarter amid a broader drop in internet curiosity revenue and better threat provisions. The lender nonetheless mentioned it has lifted its 2024 expectations for internet curiosity and internet commissions revenue, and confirmed its full-year forecast of reaching a internet results of 2.4 billion euro, in contrast with 2.2 billion euros in 2023.
Talking to CNBC’s Annette Weisbach, Commerzbank CEO Bettina Orlopp mentioned the financial institution skilled a “superb quarter,” whereas acknowledging a transparent impression on enterprise from decrease rates of interest in Europe.
She burdened that Commerzbank was on a path of elevating its share worth by means of a mix of capital return and better profitability and the expediency with which the lender hits its targets.
“We’ve an excellent technique in place, which can be delivering,” she mentioned — as markets look ahead to whether or not the financial institution will assume a protection technique to fend off takeover curiosity.
Commerzbank has up to now shied from UniCredit’s courtship. When the Italian lender confirmed its hand by utilizing derivatives to construct a possible 21% stake in Commerzbank, the German lender appointed a brand new CEO and sharpened its monetary targets. On Monday, the German financial institution mentioned it had acquired regulatory approval to purchase again 600 million euros ($653 million) in shares, attributable to kick off after the Wednesday earnings report and full by the center of February.
But Orlopp informed CNBC that Commerzbank was not intrinsically against a merger:
“We’ve nothing to be towards, as a result of there may be nothing on the desk. That is crucial to notice. And we additionally all the time mentioned we might be very open to debate, if they’d one thing approaching the desk, we are going to rigorously overview that with our personal standalone technique and see the place we are able to create extra values within the curiosity of our stakeholders,” she mentioned.
The German authorities has but to bless the potential union, with Chancellor Olaf Scholz slamming that “unfriendly assaults, hostile takeovers are usually not a very good factor for banks,” in late-September feedback carried by Reuters.
The most important shareholder of Commerzbank, the Berlin administration retains a 12% stake after rescuing the lender through the 2008 monetary disaster and divesting 4.5% of its preliminary place in early September.
However a possible schism at house might waylay Scholz’s ruling alliance from intently supervising the transaction, with coalition members attributable to maintain scheduled talks afterward Wednesday.
“Let’s put it this fashion: we would not be right here if we hadn’t been invited to purchase that stake. And it began in a method that we thought was constructive,” UniCredit CEO Andrea Orcel informed CNBC’s Charlotte Reed on Wednesday. CNBC has reached out to the German Ministry of Finance for remark.
Urge for food for big European cross-border financial institution mergers has simmered for the reason that controversial 2007 takeover and later evisceration of Dutch lender ABN Amro by a consortium led by the Royal Financial institution of Scotland — which introduced each banks to break down through the monetary disaster. UniCredit CEO Andrea Orcel, then a senior funding banker at Merril Lynch, suggested on the ABN Amro transaction — and has as soon as extra turned his eye to worldwide ventures, after the Italian lender walked away from a home deal to amass the world’s oldest financial institution, Monte dei Paschi, in 2021.
UniCredit is already current in Germany by means of its HypoVereinsbank department — which Orcel mentioned he sees, alongside Commerzbank, as “two mirror pictures.”
Final yr, UniCredit bought an almost 9% stake of Greece’s Alpha Financial institution from the state-owned Hellenic Monetary Stability Fund. On Tuesday, the Italian lender introduced it accomplished buying a majority 90.1% curiosity in Alpha Financial institution’s Romanian enterprise and plans to finish absorbing the entity within the second half of 2025.
With a typical fairness tier 1 ratio (CET 1) — a measure of a financial institution’s power and resilience — above 16% within the first three quarters of this yr, UniCredit seems outfitted to climate the pressure of a takeover. Final week, Fitch Scores upgraded its ranking on UniCredit’s long-term debt to BBB+ — simply above the BBB grade of Italy’s sovereign bonds — citing the lender’s “multi-year lengthy restructuring, stability sheet de-risking and materially improved loss absorption capability.”
The rankings firm famous that UniCredit’s acquisition of a 21% stake in Commerzbank had had no “quick impact” on its rankings.
Orcel disregarded the publicity dangers related to its stake construct within the German lender and a possible takeover:
“Our CET1 is loads larger than the one Commerzbank has, [but] we have to take a look at liquidity, we have to take a look at all the pieces else, like ranking companies. On the finish of the day, I do not suppose there’s a concern there. If there was, we might find out about it earlier than we ever had moved,” Orcel famous, stressing UniCredit’s report in Germany:
“Unicredit went by means of an actual tough time by means of the [financial] disaster,” he mentioned. “At no time did we squeeze Germany, at no time did we repatriate capital or liquidity from Germany, at no time did we ask for presidency help. One thing that Commerzbank needed to do.”
However the deal shouldn’t be but carried out — and Orcel mentioned UniCredit will solely march forward “if it offers us the returns out traders count on, really, they should enhance these returns meaningfully.”