Commerzbank Speeds Up Planning Amid Potential UniCredit Bid
(Bloomberg) -- Commerzbank AG has accelerated strategic planning as it seeks to prepare for a potential takeover offer from rival UniCredit SpA.
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“Normally, we would not have started this until next year,” Chief Executive Officer Bettina Orlopp told German business daily Handelsblatt in an interview published Monday, referring to internal discussions about the lender’s strategy beyond 2027. “We are now bringing it forward because we want to have a basis for comparison in case UniCredit offers us a merger.”
A merger would take years to implement, so it’s important to be able to compare such a scenario with a medium to long-term perspective as an independent institution, she said.
Commerzbank’s shares were up as much as 2.4% on Monday, hitting the highest level since August 2011.
Commerzbank is working to shore up investor support after UniCredit last month unveiled a large stake and said a takeover is an option. Orlopp previously presented new financial targets for the period until 2027, including a pledge to increase profitability and pay out more money to investors.
UniCredit CEO Andrea Orcel has said he’ll seek to influence Commerzbank’s strategy, whether a takeover happens or not. He has pointed to UniCredit’s higher profitability as evidence that his ideas would be beneficial for all shareholders in the German lender, and has said a potential takeover would be a test case for Europe.
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Orlopp pushed back against those suggestions in the interview published Monday, saying differences in profitability reflect the fact that UniCredit operates in markets with lower wage costs and higher returns. She also said a merger wouldn’t advance European integration because Commerzbank would be combined with UniCredit’s existing German business.
Analysts at Citigroup Inc. said in a note on Monday that they see Commerzbank at €16 per share on a standalone basis, while a bid could value the stock at €19.50. Orlopp said in the interview Commerzbank can reach a share price of at least €25 on its own, without providing a clear time frame.
Deal Risks
A takeover would come with risks such as client attrition, because a combined lender would have to reduce exposure to some borrowers that currently have loans with both firms. Additionally, some companies would probably look for alternative banks because they don’t want to be too dependent on one institution, she said.
Commerzbank’s credit rating would also be at risk, Orlopp told the newspaper. A downgrade would increase funding costs and drive away customers who only do business with banks with very good credit ratings, she said.
S&P Global Ratings has said that Commerzbank’s creditworthiness “could come under pressure” in case of an acquisition given its ratings are currently stronger than UniCredit’s. By contrast, Moody’s has said it does not expect a takeover to undermine Commerzbank’s financial strength and profile.
(Adds share price movement in fourth paragraph.)
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