Italy’s UniCredit made a surprising move on Monday with a €10 billion ($11 billion) all-share offer for smaller domestic rival Banco BPM, even as it continues exploring a potential deal with Germany’s Commerzbank. UniCredit shares surged up to 16% in morning trading following the announcement. The bid comes shortly after UniCredit acquired a 5% stake in the bailed-out mid-sized lender Monte dei Paschi di Siena (MPS.IT), a step widely viewed as setting the stage for a future merger as MPS restructures its operations. Meanwhile, Banco BPM recently took a 5% stake in asset manager Anima Holding, signaling interest from both investors and MPS management in a potential collaboration.
UniCredit, Europe’s top private bank, is led by veteran dealmaker Andrea Orcel, who is pursuing consolidation across the continent to boost profitability and make it less reliant on lending revenues. Since taking over in 2021, Orcel has returned 17.6 billion euros to shareholders through buybacks and dividends. Analysts say that whether he can deliver on his ambitions of further consolidation will depend mainly on how a deal with Commerzbank would lift valuation metrics for UniCredit.
The European Central Bank (ECB) will play a vital role in any merger between the two banks. UniCredit has permission from the ECB to own up to 9% of Commerzbank directly, but it is seeking approval to increase that to as much as 29.9%, a source familiar with the matter said. The source added that a merger would require the ECB’s approval and its supervisory board to vote on the proposal.
UniCredit has pressed ahead with its plans to acquire Commerzbank even though some of the German lender’s managers, staff, and politicians have weighed in against it. The Italian bank’s advance has sparked a backlash, with Germany’s finance minister warning that hostile takeovers threaten the financial system.
UniCredit’s investment arm bought a 6% stake in Munich-based HypoVereinsbank this week as a sign that a tie-up with Commerzbank may still be on the cards. A purchase would add a strong presence in Germany, where the lender’s loans account for 8% of its overall customer business.
Analysts say UniCredit will likely seek more funds next year in a rights issue to dispel concerns about its capital base. It also expects higher fee income and lower provisions to drive profit growth. The bank’s consolidated net income jumped to 2.8 billion euros in October-December from 2.6 billion euros, with revenue confounding expectations. This was boosted by a 900 million euro writeback of tax assets. Its loan book remained well-controlled, with non-performing loans falling. This significantly improved from the previous quarter when the bank recorded 4.3 billion euros in bad debt provisioning. Those lower levels will be necessary as the ECB’s monetary policy will remain restrictive.
