Unicredit intervenes in the marriage between Commerzbank and Deutsche Bank. For now it is only an indiscretion, but the news revealed by Financial Times has already toured all over Europe.
According to the British newspaper, Unicredit would have "put itself in a corner" to watch how the negotiations are going on the possible merger between Commerzbank and Deutsche Bank sponsored by the German government, which in this context plays the unusual role of wedding planner. In the event that – and it is not a remote hypothesis – what is considered the wedding of the year in Germany does not take place, the Italian bank led by Jean Pierre Mustier would be ready to take advantage of it by presenting a multibillion-dollar offer for Commerzbank .
DEUTSCHE BANK-COMMERZBANK: HOW THE NEGOTIATIONS ARE GOING
According to rumors published this morning by Financial Times and confirmed by Reuters, Unicredit would have adopted a wait-and-see strategy. As long as the hopes of a possible marriage between Commerzbank and Deutsche Bank remain standing, the bank in Piazza Gae Aulenti has no intention of getting in the way.
This is exactly the point. The negotiations between the two German banks, writes FT, are reportedly encountering some difficulties due to the opposition of the trade unions – worried about the very heavy employment repercussions of the merger deriving from the overlap between the two realities which would require severe cuts – and the perplexity of the supervisory authorities. Not only that, the heads of the institutes would not even agree on the timing. Commerz would like to know shortly whether the negotiations are destined to intensify or not, while Deutsche Bank would like to have more time. In the morning, a source close to the situation partially denied these "frictions", saying a Reuters chand the talks between Deutsche and Commerz are progressing well and that the two banks agree that, if they succeed in merging, they will do it “properly”.
The German business weekly Wirtschaftswoche, in the issue published today, April 5, reports that the Commerzbank board will decide on April 9 whether to intensify discussions with Deutsche Bank or withdraw from the negotiations. The latter has instead made it known that on April 26 it will make communications to the market.
In the meantime, the German government is observing the matter very closely, not only from a financial point of view - as the first shareholder of Commerz - but also and above all from a political point of view, pushing for an internal solution. Angela Merkel who has repeatedly expressed her opinion in favor of the marriage between the two major German banks. At the beginning of March, Finance Minister Olaf Scholz invited the two giants to intensify negotiations in order to create a national and European champion, but above all in order to prevent some foreign "intruder" (such as Unicredit?) from getting their hands on on the capital of one of the two banks.
AS COMMERZ AND DEUTSCHE BANK ARE
The hope is therefore to be able to overcome the difficulties both banks are facing through a marriage that finally manages to create a solid and stable giant capable of leaving behind the problems relating to profitability, high costs and stock market fluctuations that have characterized both realities for some time.
"By putting two guys on crutches together, you won't have a marathon runner", explained Markus Kienle of SdK to Agi, a position that sums up the perplexities of many analysts. Doubts that however are not limited to this. Steve Hussey (Senior Vice President and Head of Financial Institutions Credit Research at Alliance Bernstein) explains that in order to overcome the problems related to profitability, increasing the size of banks through a merger could be a solution. However the marriage between Deutsche and Commerz would result in un "overlapping" on the internal market which would require the closure of many branches, with important employment consequences.
In this context, it should also be remembered that Commerzbank is still in the throes of a tough restructuring plan made necessary due to the acquisition of Dresdner Bank, which took place 10 years ago. An operation that forced the Federal State to intervene, entering the capital of the bank of which today it is the main shareholder with a 15% stake.
Deutsche Bank is even worse, engaged in a plan "of tears and blood" that allowed the institute to achieve profit in 2018. A result considered encouraging by analysts, but which nonetheless represents the first step on a path that is still uphill.
THE UNICREDIT HYPOTHESIS
Unicredit's interest in Commerzbank did not arise today, but it even dates back to 2017, when after the first approaches, the Italian bank gave up presenting an official offer precisely because of the position of the German government, which has always been opposed to cross-border banking agreements.
According to the Financial Times However, Unicredit may soon return to office, presenting a proposal aimed at acquiring a significant stake in Commerzbank and then fwave it in its German subsidiary HypoVereinsbank. The headquarters of the new entity that would arise from the wedding would remain in Germany, benefiting from the status of German bank for funding purposes, while Unicredit would remain listed on the Milanese stock exchange.
However, there are Two obstacles to consider: the first always concerns the possible opposition of the German government, which could decide to get in the way despite the disappearance of the "domestic" hypothesis, the second instead has to do with the position held so far by the CEO of Unicredit, Jean Pierre Mustier. In an interview, the CEO stated that “there cannot be a non-organic evolution of the group for three-four years, adding that “with the current scenario, it is difficult for anything to happen in Europe”. Still with regard to possible cross-border mergers, on another occasion the CEO of Unicredit had declared that in the near future they have low probabilities of occurring and would only make sense if they allowed for cost cutting.
In the event that an offer is actually reached, it must also be considered that Unicredit could have formidable contenders, giants of the caliber of Ing, Bnp Paribas and Santander.
UNICREDIT-COMMERZ: WHAT ANALYSTS THINK ABOUT THE POSSIBLE MARRIAGE
Skeptics the experts of Jefferies, according to which “although nothing can be ruled out, we continue to see low probabilities of success for large-scale cross border M&As due to execution risks and the unfavorable regulatory environment”.
Mediobanca Securities instead he argues that a merger between Commerzbank and Unicredit would be "theoretically plausible" but "practically unfeasible". Despite this, "probably - continue the analysts - from an industrial point of view, a Unicredit-Commerz agreement could make more sense than vice versa Deutsche Bank-Commerzbank, given the greater business and the geographical combination Commerzbank-Hvb".
Equity instead, he stresses that "Commerzbank has a profitability that is half that of Unicredit, the risk of implementing the integration would exceed the benefits of any cost synergies". Not only that, "a dimensional increase would translate" for the Italian group into "less chances of seeing the capital buffers reduced".
Possible the experts of Imi Bank which instead do not exclude that the new plan that Unicredit will present on December 3 may contemplate "the possibility of evaluating cross-border opportunities with the aim of strengthening the pan-European presence of the group".
