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UniCredit CEO Says Commerzbank Takeover Too Costly for Now

UniCredit has quietly acquired a 28% stake in Commerzbank but CEO Andrea Orcel says the bank’s elevated share price makes a takeover unattractive at present. Political resistance from the German government and Commerzbank itself further complicates any potential acquisition, keeping UniCredit’s ambitions on hold.

UniCredit CEO Says Commerzbank Takeover Too Costly for Now

UniCredit Rules Out Immediate Takeover of Commerzbank Due to High Share Price

UniCredit’s CEO, Andrea Orcel, has indicated that the Italian lender considers the current market valuation of German bank Commerzbank too steep to justify a takeover offer. Despite holding a significant stake in Commerzbank, UniCredit remains cautious about proceeding with any acquisition at today’s elevated share price.

UniCredit’s Surprising Stake in Commerzbank

Since last September, UniCredit has quietly accumulated a 28% stake in Commerzbank primarily through derivative contracts. This buildup was done with the European Central Bank's approval to hold up to 29.9% ownership in the German bank.

Share Price Valuation Deterring Acquisition

When questioned about a potential takeover offer at a premium to Commerzbank's current share price, Orcel remarked, “At this [share] level, we would not see value for our investors. We’re pleased with the gains from the 30% stake, but a merger price right now does not make sense.”

Commerzbank shares have climbed by a remarkable 76% year-to-date, driven by a strong rally in German equities. This surge follows Berlin’s recent policy shift to relax fiscal constraints and boost defense spending, enhancing investor sentiment across the market.

Obstacles from German Government and Commerzbank

Despite its substantial stake, UniCredit is far from making a formal takeover bid. Orcel emphasized that any acquisition attempt would first require addressing strong opposition from both the German government and Commerzbank’s management.

“We are a long way off from a merger offer,” Orcel stated. He added that the current market activity seems designed to sustain Commerzbank’s share price above its fundamental value and that UniCredit is in no rush.

Recent comments from Germany’s Finance Minister Friedrich Merz further reflect resistance, labeling UniCredit’s approach as “uncoordinated and unfriendly” and reaffirming Berlin's support for a strong and independent Commerzbank.

Better-than-Expected Results for Commerzbank

Commerzbank recently posted earnings that surpassed expectations, with a 29% increase in net profit year-over-year. This performance adds to the bank's positive momentum amid market speculation about its future.

UniCredit’s Strategic Challenges

Since late last year, UniCredit has been navigating a complex landscape, balancing its ambitions in Germany with simultaneous takeover attempts in Italy, all while facing resistance from multiple fronts. This underscores the challenges of cross-border banking mergers in a politically charged environment.

In summary, UniCredit’s sizeable investment in Commerzbank signals serious interest, but the current valuation and political headwinds mean any takeover bid remains on hold. For now, patience and strategic negotiation seem to be the order of the day.

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