UniCredit seeks ECB approval for larger stake in Commerzbank

The Italian lender, UniCredit, is reportedly preparing to file an application with the European Central Bank (ECB), seeking approval to increase its stake in Germany's Commerzbank AG to as much as 30%, according to a report by Il Messaggero on Tuesday.

The news spurred a surge in Commerzbank shares, reaching €15.85 before a slight pullback – a level not seen since 2012. UniCredit's shares also gained 0.6% following the news.

Initial stake acquisition

This move follows UniCredit's recent acquisition of a 9% stake in Commerzbank last Wednesday.

The Italian bank purchased 4.5% from the German government and another 4.5% from public investors. This reduced the government's holding in Commerzbank to 12%, although it remains the largest shareholder.

The German government has held a significant stake in Commerzbank since it injected €18.2bn into the bank during the 2008 Global Financial Crisis.

This recent sale to UniCredit represents the government's first step in reducing its holdings, as outlined in a press release on 7 September: "The Federal government intends to reduce its stake in the German bank Commerzbank AG (Commerzbank)."

UniCredit had previously expressed its intention to exceed a 10% ownership in Commerzbank, stating last week that it would seek regulatory approval to potentially surpass the 9.9% threshold if necessary.

Key ownership thresholds, including 10%, 20%, 30%, and 50%, all require approval from the ECB.

Regulatory scrutiny ensures that major shareholders are suitable for significant ownership in financial institutions. A 30% ownership stake could trigger a mandatory full takeover under German law. Sources told Reuters that Commerzbank was urgently discussing defence strategies.  

The ECB likely to welcome the plan

Cross-border bank mergers are favoured by European Union politicians, as they are seen as key to boosting the EU's competitiveness on a global scale. They also align with the EU's strategic plans for a more integrated banking union within the single market.

ECB President Christine Lagarde recently indicated her support for greater financial sector integration in the euro area, mentioning that the potential tie-up between UniCredit and Commerzbank would be well received.

Once UniCredit submits its application, authorities, including Germany's financial regulator BaFin and the ECB, will have between 60 and 90 days to issue a response.

Deutsche Bank seeks ways to oppose the deal

Deutsche Bank AG, the country's largest bank, is reportedly exploring ways to block the deal. Should UniCredit proceed with a full takeover of Commerzbank, it could create a new banking giant that might surpass Deutsche Bank as Germany's largest financial institution.

In response, Deutsche Bank's executive team is devising a defence strategy, which may include acquiring the remaining 12% of Commerzbank still owned by the German government.

Deutsche Bank had previously engaged in talks with Commerzbank in 2019 over a potential buyout, but the merger discussions collapsed due to concerns over high restructuring costs.