Commerzbank to begin talks with UniCredit as it woos investors with profit goals

Commerzbank will hold a first round of talks with UniCredit on Friday (Sep 27) as the Italian lender presses for a possible tie-up, the German bank’s designated CEO, Bettina Orlopp, said on Thursday (Sep 26).

UniCredit earlier this month revealed it had bought a 9 per cent stake in Commerzbank, plans to buy more shares and has pressed for discussions to explore a tie-up.

UniCredit’s swoop is the most ambitious attempt yet at a pan-European bank merger, but it faces considerable political hurdles in Germany ahead of national elections.

Orlopp’s comments on the potential tie-up are her first since she was named this week the German bank’s next chief executive officer at a critical juncture in its 154-year history.

Just minutes earlier the bank said its supervisory and management boards unanimously agreed to support the bank’s current strategy of independence, and increased profit and payout targets to bolster support among investors.

Orlopp, speaking at a financial conference in London, said the bank was open minded but that the speed of synergies and risks to executing any deal needed evaluation.

“Sometimes it makes sense, sometimes it doesn’t make sense, and that is something we need to find out jointly,” she said.

But the bank also wasn’t going to engage in any “crazy” sell-downs, acquisitions or “stupid things”, she warned.

Her comments effectively serve as a response to UniCredit’s chief Andrea Orcel, who said on Wednesday at the same conference that a tie-up would be the best outcome. UniCredit didn’t immediately respond to a request to comment on Friday’s talks.

Commerzbank shares extended their gains on news of the talks, and were last up 6 per cent at the highest since 2011. UniCredit shares rallied 4.5 per cent.

Commerzbank’s management, employees and the nation’s chancellor, Olaf Scholz, have all voiced opposition to a potential takeover, but at least one big investor and some business leaders favour talks.

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.

The boards’ support for the current strategy was “unanimously confirmed,” the bank said in an earlier statement on Thursday.

That agreement came after the supervisory board, which includes a number of members vehemently against a tie-up, met with management on Wednesday at an annual retreat in the woody hills outside Frankfurt.

The bank also increased a key profitability metric and promised to pay shareholders more in dividends and buybacks in its statement.

It is now expecting its return on tangible equity to be 12.3 per cent in 2027, more than the 11.5 per cent previously flagged and better than analyst estimates of around 10 per cent.

The bank also set a profit forecast for 2027 of more than 3 billion euros (S$4.29 billion), which is roughly in line with analyst expectations. REUTERS