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Commerzbank has discussed the future of its share buyback programme after Italian lender UniCredit built a 9 per cent stake in the German bank in what could be the opening move of a full takeover bid.
The boards of Germany’s second-largest listed lender on Wednesday evening agreed to “put everything under review” while they tried to assess UniCredit chief executive Andrea Orcel’s intentions towards the bank, according to people familiar with internal discussions.
Orcel confirmed on Thursday morning that UniCredit was considering whether to increase its stake in its German rival, as well as the potential for a merger.
“Given that we are now an investor, we can engage constructively as to whether we all want to create something more than just the value that can be created by Commerzbank standalone,” he told Bloomberg TV.
“We may go up, we may go down, and we may combine,” he added. “We are very patient.”
One of the items under scrutiny by Commerzbank’s boards is the bank’s current commitment to buy back additional shares, some of the people said.
Board members of the lender, which is still 12 per cent owned by the German government, are concerned that UniCredit’s stake would automatically rise if the bank continues to buy back shares, assuming the Italian rival does not sell any of the stock it holds.
Commerzbank announced last month it was seeking regulatory approval to buy back another €600mn in shares, close to 3.5 per cent of its current market capitalisation.
According to Financial Times calculations, UniCredit’s stake would rise to 9.33 per cent without the Italian bank buying any further shares.
Commerzbank told the FT in a statement: “While many things are under review in such a situation, there are no considerations to suspend the share buyback programme. Our plans remain unchanged. We are waiting for the approval [from regulators] and will then start.”
Commerzbank has increased returns to shareholders over the past two years as its performance has strengthened following a turnaround programme under outgoing chief executive Manfred Knof.
The bank last year launched the first share buyback in its 154-year history and has since acquired €720mn of its own stock. In 2022 it resumed dividend payments for the first time since 2018, and last year increased the payouts by 75 per cent to €0.35 a share. Analysts expect another 46 per cent rise in dividends to €0.51 a share for 2024.
Commerzbank’s management, which was taken by surprise by UniCredit’s move on the bank, had its first conversations with Orcel ahead of the emergency board meetings.
People familiar with the matter described it as a courtesy call that did not include detailed discussions about Orcel’s future plans.
Decision makers at Commerzbank will need a much more detailed understanding of UniCredit’s intentions before they can assess the case for any tie-up and its alternatives.
Employee representatives, who under German law hold half the seats on the supervisory board, have already said they would seek to scupper any deal and pressed management to safeguard the bank’s independence. However, executives stressed that they were legally required to assess the options and take a decision in the best interest of all of the bank’s stakeholders.
One person familiar with the discussions pointed out that it could be difficult, if not impossible, to come up with a standalone case for Commerzbank that is economically superior to a takeover, adding that the bank’s actions could not be led by wishful thinking.
European Central Bank president Christine Lagarde told journalists on Thursday that “clearly cross-border mergers have been hoped for by many authorities and it will be very interesting to see that process to unfold in the weeks to come”. She declined to comment on the details of the potential transaction.
Opposition politicians in Germany have already laid into the federal government’s handling of the sale of a 4.5 per cent block of Commerzbank shares, bought by UniCredit, which enabled the Italian bank to build its 9 per cent position under the radar by buying a further 4.5 per cent on the open market. The government announced this month that it planned to reduce its 16.5 per cent stake gradually.
Matthias Hauer, an MP who heads the conservative Christian Democratic Union’s group in the German parliament’s finance committee, said: “Besides fiscal aspects, strategic considerations should be taken into account, too.”
Commerzbank plays a key role in funding Germany’s small and medium-sized companies.
Fabio De Masi, a member of the European parliament for the newly created leftwing Sahra Wagenknecht Alliance, said: “Germany’s economy is currently exposed to large shocks and we need reliable financiers for small and medium-sized companies.”
He added that UniCredit already owned Munich-based HypoVereinsbank and a tie-up with Commerzbank could lead to “a high degree of market concentration on the banking market with risks for financial stability”.
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