(Reuters) – UniCredit’s purchase of a 9% stake in Commerzbank has raised the prospect of a merger which has long been considered a natural option for the Italian lender, which entered the German market in 2005 by buying Bavarian peer HypoVereinsbank.
UniCredit in 2001 had attempted a move on Commerzbank, which it aborted just before the Sept. 11 attacks.
The Milan-based bank worked on a possible offer in 2019, but met political resistance. A push under current Chief Executive Andrea Orcel in 2022 led nowhere due to the Ukraine conflict.
Germany accounts for around 20% of UniCredit’s net profit.
Here are some views from analysts on the latest move:
UBS
If a full bid took place, the weight of Germany for UniCredit would rise to around 40% from 20%-25%.
UniCredit could fund at least part of a potential deal with cash without its core capital breaching the 13% threshold the bank wants to respect.
“We’d expect some scrutiny about the rationale behind (i) the stake build up versus a larger initial investment, and (ii) the risks of deploying additional capital in Germany at this difficult juncture … but our initial view on the deal is positive insofar it opens the door for UniCredit to use excess capital in a geography it already operates and under financially attractive terms at first sight.”
BANK OF AMERICA
A deal would allow UniCredit to double its market share with German SMEs, cut costs and re-enter the Polish market.
“While in principle we believe such a development would potentially be a win-win for all parties involved, deal terms, the size and nature of the deal would come with some execution risk and possibly political/financial hurdles.”
CITI
A simulation over the summer indicated a deal would yield an earnings per share (EPS) boost of more than 8% in 2027, assuming a 20% premium bid. The fall in Commerzbank’s share price since then entails a larger EPS boost.
However, “we wonder why UniCredit has not launched a full takeover at this stage and what could be the timetable, as this could result in lower financial benefits”.
Citi notes Germany is a less profitable market than Italy.
EQUITA SIM
Assuming UniCredit pays a 20-25% premium in an offer half in cash, half in shares, a merger that allowed Commerzbank to cut costs by 10% would boost earnings per share by more than 15%.
The combined entity would have a return on tangible equity (ROTE) of more than 16.5%, compared with around 8% for Commerzbank at present and UniCredit’s current ROTE above 17%.
MEDIOBANCA SECURITIES
With a 20% premium, Commerzbank is “comfortably the most accretive option for UniCredit” with a 25% boost to earnings per share, a 3.1 percentage point hit to core capital and an increase of 1.7 percentage points to ROTE.
(Reporting by Valentina Za; Editing by Alexander Smith)
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