UniCredit CEO Shifts Focus Amid German Resistance to Commerzbank Deal

Just days before UniCredit CEO Andrea Orcel shifted his attention to a domestic acquisition, resistance to his interest in Germany’s Commerzbank intensified. Members of Germany’s corporate elite reportedly urged Commerzbank’s CEO to reject any merger proposal, warning that the bank might suffer a fate similar to Bavarian lender HVB, which UniCredit acquired in 2005 before significantly scaling back its operations.

On Monday, Orcel unveiled a $10.5 billion bid for Banco BPM, a smaller Italian rival, prioritizing this offer over any immediate pursuit of Commerzbank. This move came after Orcel discreetly accumulated a significant stake in the German bank, catching Germany’s political and business establishment off guard.

The announcement in September provoked a sharp backlash from German politicians, industry leaders, and unions, who expressed concerns over potential job losses and reduced support for small and medium-sized enterprises (SMEs), a critical component of Germany’s economy. While some industry groups adopted a more cautious stance, Finance Minister Joerg Kukies was among those who viewed Orcel’s bid as effectively stalled.

Orcel remains prepared for a prolonged campaign in Germany, potentially spanning several months. In the meantime, acquiring Banco BPM would enable UniCredit to advance its growth ambitions while keeping the door open for a larger acquisition later.

Despite this shift, resistance in Germany remains formidable. Ulrich Grillo, head of a leading Mittelstand chemical company, expressed concern during a recent meeting, warning Commerzbank’s board about critical financing decisions potentially moving to Milan. Similarly, Christian Miele, a venture capitalist from the renowned Miele appliance family, noted that none of the attendees supported the proposed deal.

The pushback reflects lingering unease over UniCredit’s history with HVB. Following its acquisition, UniCredit drastically reduced HVB’s workforce and branch network. Under Orcel’s leadership, these cuts accelerated, and HVB’s legal status was controversially changed to grant shareholders more control, reducing the board’s independence.

Interviews with politicians, CEOs, union representatives, and government officials revealed widespread fears that a Commerzbank takeover could repeat HVB’s trajectory, undermining a bank considered essential for Germany’s SMEs. These concerns were amplified by Germany’s current economic slowdown and political uncertainty, fueling speculation that Orcel might exploit these vulnerabilities.

Boris Rhein, the premier of Hesse, where Commerzbank is headquartered, recently emphasized the bank’s strategic importance, urging it to remain independent. Speaking to a group of CEOs, Rhein likened Commerzbank to a flagship that must be protected from being “run aground.”

From UniCredit’s perspective, the HVB overhaul has been a success, delivering cost efficiencies and streamlined decision-making. According to Orcel, HVB’s cost-to-income ratio improved significantly, dropping from 59 cents per euro of income in 2005 to 44 cents by 2023. A senior UniCredit executive also refuted claims that German corporate financing decisions were made in Italy, asserting that local decision-making had been strengthened in recent years.

Since becoming UniCredit’s CEO, Orcel has prioritized boosting returns, driving a nearly fivefold increase in the bank’s share price. Addressing analysts on Monday, he acknowledged that Germany’s political climate, including upcoming early elections, made an immediate move on Commerzbank unlikely. Orcel hinted that a takeover might remain off the table indefinitely, stating that by the time a second deal could close, the first integration would already be underway.

Banco BPM has been a long-standing target for Orcel, whose acquisition would help UniCredit close the gap with Intesa Sanpaolo, Italy’s largest bank. Commenting on the situation, London Business School economics professor Richard Portes suggested that Orcel’s actions signal to Germany that he is willing to wait for the right opportunity to revisit Commerzbank.

Have you read?
Richest Countries In Europe In 2024.
Most Attractive Countries To Private Equity, Venture Capital, and Hedge Fund Investors.
Revealed: Highest-paid news media executive in the United Kingdom.
Countries Leading the Way on Climate Change.
World’s Best Countries For Adventure Tourism.