European Regulators Signal Backing for Possible Commerzbank Deal

Mark Schroers, Nicholas Comfort and Kamil Kowalcze
3-min read
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(Bloomberg) -- A potential takeover by UniCredit SpA of rival Commerzbank AG would likely get regulatory approval, several senior central bank and supervision officials indicated, saying there are few reasons why a deal should raise concerns.

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The European Central Bank would probably give a green light to an offer from UniCredit, the officials from Germany and various other jurisdictions said. Almost all took a positive general view on cross-border consolidation as a way to overcome financial fragmentation and boost bank profitability in Europe.

One official noted that UniCredit is a well-run bank. Still, a few cautioned that the creation of bigger banks can lead to bigger risks. All asked not to be named discussing the private information.

Representatives for the ECB, UniCredit, Commerzbank, the German finance ministry and watchdog BaFin declined to comment.

UniCredit Chief Executive Officer Andrea Orcel has said an acquisition of Commerzbank is one option he’s considering, after building a major stake in the rival. The German government, which holds 12% in the German lender, opposes a takeover but has indicated there’s little it can do to prevent the UniCredit from buying more of the company.

Berlin has suspended any further share sales in Commerzbank after UniCredit used a placement of government shares in September to boost its holding to around 9%. Orcel has since secured more stock and applied for approval from the ECB to raise the holding to as much as 29.9%. Any formal takeover bid would need to get a nod from the regulator as well.

When asking for regulatory approval to take a big stake in a bank, investors need to show they have a good reputation and sufficient financial resources to support the firm. Going a step further and acquiring a lender entails an assessment of their business plan.

One of the officials contacted by Bloomberg suggested a takeover could have a negative impact on the German economy. Another expressed irritation over the way the Italian bank built its stake in the German rival. Both added that a potential takeover likely couldn’t be prevented.

Several supervision officials privately indicated they see a contradiction between the German government’s general support for European Union integration and its opposition to a UniCredit takeover.

Government officials have criticized UniCredit’s way of buying the stake without flagging its potential participation in the run-up to the action. Orcel has said he had been transparent about his strategy. He also said Berlin was aware that UniCredit already owned a stake in Commerzbank before buying more shares from the government.

ECB officials including President Christine Lagarde, Vice President Luis de Guindos and Frank Elderson have expressed public support for bank consolidation in Europe since UniCredit disclosed its move on Commerzbank. They have each declined to comment on individual situations.

Bank mergers across borders “can be an instrument for further integration of the European banking sector” and it can also “help address long-standing issues” such as the sector’s low profitability, ECB Executive Board member Elderson said in an interview with newspaper Delo earlier this month. “Nonetheless, mergers always carry risks and, as supervisors, we assess them carefully.”

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