UniCredit on Monday significantly stepped up its efforts to take over Germany's Commerzbank. In a presentation, the bank described Commerzbank's standalone strategy as "overpriced" and "unprepared for the future" and said the German bank is "writing a story of operational underperformance" and is overvalued given its fundamentals. UniCredit chief Andrea Orcel said a merger of the two banks would send a "clear signal" and create a "country leader" and a "European benchmark" capable of competing with US and Chinese giants.
The reaction of the stock exchange has so far been mixed. Shares in UniCredit in Milan fell by around 2.3% to 68.5 euros, while Commerzbank in Frankfurt added around 0.9% to around 36.4 euros. Thus, the market perceives that Italy is increasing pressure on the target bank, but at the same time, the likelihood is growing that Commerzbank shareholders will demand a higher price, if they agree to the transaction at all.
The €35 billion bid
UniCredit made a formal bid for Commerzbank $CBK.DEin March worth around €35bn, which it constructed to push its stake slightly above 30% without formally gaining full control. The Italian bank already holds around 26% of the shares, and controls another 4% or so through total return swaps, so it is de facto just below the threshold that triggers a mandatory bid under German law.
UniCredit criticises that Commerzbank's management overestimates its own 'Momentum' growth plan. It claims that the 2025 results actually mask a miss on cost targets by about €200m, which has been replaced by higher net interest income of about €500m. The Italian bank also points out that loan growth outside the key markets of Germany and Poland has reached 24%, while in Germany itself it has only reached about 1%, which it says points to an "overly staggered" and riskier international model.
As part of its own "Commerzbank Unlocked" proposal, UniCredit $CRIN.DE promises that it would be able to increase Commerzbank's return on tangible equity to above 19% by 2028, compared to its current target of 15%. It would like to reduce the cost-to-income ratio to around 40% (compared to 47% in the Momentum plan) and increase the bank's net profit to around €5.1bn, compared to the expected €4.5bn. However, Orcel said this would require an investment of about €1.7bn in the transformation and the creation of additional loan loss provisions of about €500m.
Combination with HypoVereinsbank: a "German-Italian giant" by 2030
Another part of the plan envisages that Commerzbank would eventually merge with HypoVereinsbank (HVB), the existing German subsidiary of UniCredit. In the so-called "combination" scenario, UniCredit aims for the merged group to have a net profit of around €21 billion and a cost-to-income ratio of around 30% by 2030 - parameters that are close to the most efficient European banks.
At the same time, UniCredit assures that Commerzbank would operate separately and under its own name for the first 18 months after gaining control, before deeper integration with HVB. On jobs, the bank promises that about 60% of the projected cost savings are to come from areas outside its direct staff in Germany - i.e. its international network and support activities - and the overall reduction in staff in Germany over five years should be less than half of the 15,000 positions speculated by some critics.
Commerzbank: no "added value", we stick to 2028 targets
However, Commerzbank's management is making it clear that it is not interested in the transaction in its current form. Already on 7 April, the bank announced that, following discussions with UniCredit, it "does not see the basis for a mutually agreed value-adding transaction" and that the Italian side had failed to show additional shareholder benefits compared to Momentum's current strategy.
In an interview with Bloomberg TV, CEO Bettina Orlopp said that while there had been some discussions with UniCredit, the views of the two sides were "fundamentally different" on the valuation and share exchange ratio itself. Commerzbank therefore confirms its targets for 2028: a return on tangible equity of 15%, a cost/income ratio of 50%, a CET1 capital ratio of 13.5% and a net profit of around €4.2 billion.
For 2024, the bank generated a net profit of EUR 2.63 billion (after EUR 2.68 billion in 2023), despite restructuring costs. Net profit before these costs rose by around 13% to a record €3bn, which Commerzbank presents as proof that Momentum works and there is no need to undergo a controversial cross-border merger.
German state opposes: 'hostile attack' on key bank
The German government, which holds a stake of around 12-13% in Commerzbank following the bank's rescue during the financial crisis, has also taken a completely negative stance. According to the German media and statements by politicians, the cabinet sees UniCredit's move as a "hostile attack" because it considers Commerzbank a key domestic institution for financing SMEs and exports.
The Social Democratic Party, which is part of the ruling coalition, is reportedly opposed to the sale of the bank into foreign hands, despite earlier talk of a gradual reduction of the state's stake. The government is now one of the most vocal opponents of the takeover, even though it was its participation and capital injection that opened the way for UniCredit to gradually increase its stake.
Next steps: bid in May, market and regulators to decide
UniCredit's formal offer is due to be launched at the beginning of May, with around four weeks for Commerzbank shareholders to decide whether to accept it. The Italian bank has called an extraordinary general meeting for 4 May to seek approval for the capital increase needed to issue new shares for the exchange.
If UniCredit manages to acquire a stake of over 30% and convince a sufficient number of shareholders, the transaction would face a complex approval process by European and domestic regulators. In an optimistic scenario, UniCredit envisages a settlement in the first half of 2027, once all approvals have been obtained.
For now, however, what is clear is that the battle for Commerzbank is heating up: UniCredit is stepping up public pressure and painting a picture of a supposedly "underperforming and overpriced" German bank, while Commerzbank's management and the German state are fighting back and betting on their own Momentum plan. How UniCredit's aggressive strategy ultimately plays out will now depend largely on the patience of investors, the attitude of regulators and the willingness of German politicians to allow the country's second largest bank to come under the wing of an Italian competitor.