Photo credit: www.investing.com
UniCredit Advances Stake in Commerzbank Amid Regulatory Scrutiny
MILAN (Reuters) – In a strategic move that has sparked significant discussion within the financial community, Italy’s UniCredit has utilized derivative contracts to enhance its potential stake in Germany’s Commerzbank to nearly 21%. This development occurs as they seek regulatory approval to surpass the existing limit of 9.9% ownership.
UniCredit’s CEO Andrea Orcel has positioned this initiative as more than just a corporate maneuver; it serves as a reflection of Europe’s commitment to transcending national boundaries in the pursuit of greater global competitiveness in banking.
This bold approach follows recent statements from Germany’s finance agency, which declared that it would pause any further sale of shares in Commerzbank, emphasizing a strategy focused on maintaining the bank’s independence.
In a statement, UniCredit expressed its belief that significant value could be unlocked within Commerzbank, whether it operates independently or as part of UniCredit. “This would benefit Germany and a broader range of stakeholders,” they noted.
As of 1233 GMT, Commerzbank’s shares dipped by 0.8%, while UniCredit saw a decrease of 2%, against a backdrop of a 0.6% decline in the European banking sector overall.
Italian Foreign Minister Antonio Tajani has lauded UniCredit’s approach, reinforcing that the European Union operates as a singular market. “Being pro-European only in words leaves something to be desired,” he remarked, underscoring the practical implications of such corporate activities.
Orcel’s strategy to bolster his stake in Commerzbank caught the German government off guard earlier this month when UniCredit successfully acquired 4.5% of the bank through a competitive tender. This followed a similar acquisition from the open market, demonstrating a calculated and aggressive approach.
Germany’s current political landscape, characterized by internal conflict among the governing coalition and declining support for the far-right Alternative for Germany party, could complicate the government’s response to UniCredit’s advancements.
Despite the competitive environment, Orcel, who has a reputation as a strategic leader within European banking, has maintained that any significant move would only proceed with ample support and consensus from stakeholders involved.
The existing 9% stake positions UniCredit as the largest private stakeholder in Commerzbank, following the German government’s retention of about 12% of shares. If regulatory approval is granted, UniCredit would transition to the primary investor in the institution.
The European Central Bank (ECB) must sanction any shareholding that crosses the established thresholds of 10%, 20%, 30%, and so forth. UniCredit has officially requested to elevate its holding to 29.9%, while concurrently initiating derivatives contracts to secure an additional 11.5% potential ownership in Commerzbank.
However, UniCredit will only assume ownership of the shares associated with these derivative contracts upon receiving the necessary regulatory approvals. “The physical settlement under the new financial instruments may only occur after the required approvals have been obtained,” the bank clarified.
As part of this process, UniCredit has submitted its proposal to Germany’s financial authority, BaFin. Once BaFin forwards the request, the ECB has a period of up to 60 days, extendable to 90 days, to provide a ruling.
In light of these developments, Italy’s second-largest bank has strategically hedged a significant portion of its economic exposure to Commerzbank, allowing for flexible future decisions—whether to maintain, divest, or further increase its investment in the German bank.
Ultimately, any forthcoming decisions will hinge on ongoing discussions with Commerzbank’s management, supervisory boards, and broader stakeholders in Germany, reflecting a collaborative approach to this significant cross-border banking endeavor.
Source
www.investing.com