Italy’s UniCredit has acquired a 9% stake in Germany’s Commerzbank and indicated its intention to seek a merger between the two financial institutions.
UniCredit purchased its shares from the German government, which had been a stakeholder in Commerzbank since the financial crisis. There has been some pushback against the unexpected move by observers who deemed the overnight purchase a clandestine move.
On the other hand, many analysts have applauded UniCredit, believing it could lead to more cross-border bank mergers in the European Union.
“European countries might be partners, but they are still competing sometimes,” said Arnaud Journois, Senior Vice President of European Financial Institution Ratings at Morningstar DBRS, in an interview with CNBC. “I know that from an EU standpoint—policymaker standpoint—there is appetite for more consolidation to happen. However, we think that there are a few hurdles that make that difficult, especially on the regulatory side.”
Facing Resistance
In addition to the standard challenges of moving assets across borders, UniCredit could face resistance from local government officials. Deutsche Bank, the largest financial institution in Germany, might also work to prevent the cross-border merger. Deutsche Bank was previously considered a top contender to acquire Commerzbank, but currently lacks the resources to pursue it.
UniCredit hopes to get approval from the European Central Bank to acquire up to a 30% stake in Commerzbank. The ECB is unlikely to object, as it has been calling for EU institutions to consolidate for some time. EU leaders want to strengthen the region’s financial institutions, which have struggled to keep up with banks in the U.S. and China.
An Ambitious Growth Strategy
There have also been calls among financial leaders for the EU to strengthen its relationship with the UK. Since Brexit, EU merchants, payments processors, and financial institutions have struggled with the regulations and fees associated with doing business in the UK. These appeals followed a meeting between Britain’s prime minister met and Germany’s chancellor to develop an economic growth strategy.
UniCredit’s growth strategy has been ambitious; a merger with Commerzbank would be the largest cross-border merger in the EU since the financial crisis. The move is also strategic for UniCredit, as it acquired its shares in Commerzbank after the German bank struggled and its valuation dipped.
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