(AFP / GABRIEL BOUYS)
Isolated operation or first episode in a new series? The desire of the Italian bank UniCredit to increase the capital of its German competitor Commerzbank revives speculations on a movement of banking consolidation in Europe.
The CEO of Italy’s second largest bank Andrea Orcel confirmed on Thursday that he would seek permission from the European Central Bank (ECB) to increase his stake in Commerzbank to 29.9%, in an interview with the daily Il Messaggero.
Unicredit currently holds 9% of the German bank after acquiring a 4.49% block last week from the German state, which still holds 12%, and the rest on the market.
– Why now? –
Unicredit is one of the European banks that has benefited most from the rise in central bank interest rates that began in the summer of 2022, accumulating nearly 15 billion euros in net profit in eighteen months, between January 2023 and June 2024.
The bank therefore has the financial leeway to afford a first tranche from Commerzbank (1.4 billion euros for the 9%) and potential subsequent ones.
Its boss Andrea Orcel, at the helm since 2021, is naturally focused on mergers and acquisitions due to his past as an investment banker at Bank of America, Merrill Lynch and UBS.
Unicredit, which is very active in Central Europe, is also already present in Germany via its subsidiary HypoVereinsbank.
On the other hand, “Commerzbank is ‘prey’ because the bank’s valuation today is very low,” observes David Benamou, partner at Axiom AI, to AFP.
A major restructuring effort has been carried out – around 10,000 employees left the establishment in the wake of a social plan launched in early 2021 – and its net profit reached a 15-year high last year, at 2.2 billion euros.
– Who could follow? –
The players in a potential European banking consolidation can be counted on the fingers of one hand, given the numerous prerequisites (significant financial strength, teams capable of overcoming regulatory obstacles, strategic will to do so).
In addition to UniCredit, the French BNP Paribas and Crédit Agricole, the Spanish Santander and BBVA as well as the Dutch ING are the most likely to meet these conditions, according to an industry analyst.
But mergers between banks from different countries come up against numerous regulatory obstacles, and even local opposition.
The German services union Verdi, which is represented on the supervisory board of Commerzbank, has already called on Berlin to “oppose” a possible takeover and not to sell further shares to UniCredit.
The lack of synergies between two retail banks in two separate countries also constitutes a powerful obstacle to this type of operation, given the differences in cultures and financial products.
Faced with these obstacles, the analyst at the rating agency Fitch Ratings Rafael Quina is “not convinced that we are on the verge of a huge movement of European banking consolidation (…) even if theoretically it would be logical”.
– Driving states? –
In the midst of the financial crisis at the turn of the 2010s, European banks widely requested political assistance, which sometimes resulted in public participation in their capital.
The gradual withdrawal of these shareholders, such as the German state, is “in line with history,” Quina told AFP. This trend towards selling “is a natural process that has accelerated a little in 2023” on the continent, he said.
“This also marks the end of a cycle,” adds Mr. Benamou, after “work of transformation, of reconstruction (which) has been done.”
A slightly better potential sale price thanks to the rise in rates on the one hand and pressure on public finances on the other are all reasons for a gradual disengagement.
European governments have offloaded more than €16 billion worth of bailed-out bank shares over the past 12 months, according to a Financial Times tally, which cites NatWest in the UK, ABN Amro in the Netherlands and Monte dei Paschi di Siena in Italy.
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