Commerzbank in talks with UniCredit, CEO says

Germany’s Commerzbank has begun talks with UniCredit over a possible takeover by the Italian lender, it said today after better than expected quarterly results, adding that a common approach by the banks can create value.

The two-year battle for ownership of Germany’s second-biggest bank by its Italian counterpart has taken a dramatic turn in recent weeks, with UniCredit edging towards control as Commerzbank officials signalled talks would soon resume after UniCredit’s €45 billion hostile takeover approach.

“We have started talks on this, which is in the genuine interest of both UniCredit and Commerzbank, as we are both determined to create value for our shareholders, clients and employees,” Commerzbank CEO Bettina Orlopp told analysts.

“I’m optimistic that, step by step, we can find common ground on governance and also on the business model.”

A Commerzbank presentation today showed its increasing willingness to work with UniCredit on a possible deal as the Italian bank nears control, having built a 48% stake in its target.

The statements came as Commerzbank reported a better than expected 94% jump in second-quarter net profit, helped by stronger commission income.

Orlopp said today that UniCredit, even with its large stake, needs to work with her management team on a path forward rather than act unilaterally on any structural changes.

“It requires a shared understanding of the business model and the involvement of all stakeholders,” she said after the German lender reported a 94% jump in second-quarter net profit, helped by stronger commission income.

Orlopp and her management team have long been opposed to a tie-up with UniCredit. There have been several rounds of talks but all have ended in disagreement.

Today offered an opportunity for management of both banks to exchange views in a long-scheduled investor call.

Commerzbank reported net profit of €898m in the quarter, up from €462m a year earlier and beating analyst expectations of €845m in a consensus forecast published by the bank.

A person familiar with UniCredit’s thinking said before the results announcement that the Italian suitor was watching to see if Commerzbank shifts focus to Germany and away from international lending and trading, exposing a difference in opinion on strategy.

Commerzbank has said its international network is key to its strategy.

UniCredit chief executive Andrea Orcel recently said that he wanted to negotiate with the German government and Commerzbank employees, sidestepping the German lender’s management.

The German Finance Ministry, which oversees a 12% stake that the government has held since Commerzbank’s bailout during the global financial crisis, said through a spokesperson that it was up to the two banks to discuss how to proceed and criticised UniCredit’s “aggressive approach”.

German opposition to Orcel’s overtures has been widespread, emphasising ⁠the difficulty of merging large banks across euro zone countries to help them compete with bigger US rivals.