EU Commission endorses Banco BPM takeover by UniCredit: Regulatory authorization granted.
Unconstrained Chat:
The European Commission has given the green light for UniCredit to take over Banco BPM, Italy's third-largest bank, with conditions. To address competition concerns, UniCredit must sell off a whopping 209 branches across the country.
This move is due to worries that UniCredit could monopolize the local market through the acquisition. By shedding these branch locations, which are primarily in areas where the two banks' services significantly overlap (such as retail banking and services for small and medium-sized businesses), competition is believed to remain untouched. A third party will oversee the implementation of these conditions to ensure everything runs smoothly.
Originally, the Commission chose not to pass the case to Italy's competition authority, preferring to handle it themselves due to their particular interest in competition within the European banking sector.
Already a Titan in Italy
UniCredit is currently Italy's second biggest banking player, after Intesa Sanpaolo, and boasts a presence not only in Italy, but also in Germany and Central and Eastern Europe. As for Banco BPM, it was created in 2017 after the merger of Banco Popolare and Banca Popolare di Milano.
Recently, UniCredit reported a quarterly profit of 2.8 billion euros – a record high for the bank. For the full year, they expect a profit of over 9.3 billion euros, with revenues around 23.5 billion euros.
UniCredit vs Commerzbank: Round Two
UniCredit's sights are now set on another target – Commerzbank. The German banking institution has already approved UniCredit's entry, holding a 9.5% stake in Commerzbank shares, making UniCredit the second-largest shareholder after the federal government (which owns 12%).
Commerzbank, however, is resisting the takeover. In response, they've announced plans to slash 3,900 jobs, including 3,300 in Germany, by the end of 2027. The German government isn't too keen on the deal either.
Curiously, Commerzbank reported a profit of 834 million euros during its first quarter this year, marking its best first quarter since 2011. In 2024, the company achieved record profits of 2.7 billion euros, up approximately 20% compared to the previous year.
Uni-Layered Insight:
Recent developments in the proposed Commerzbank takeover by UniCredit are indicative of a complex dance of strategic maneuvers, pricing challenges, and regulatory hurdles.
- UniCredit is aggressively positioning itself to boost its presence in Germany and consolidate its position in the European banking industry. After acquiring a 28% stake in Commerzbank primarily through derivatives, they aim to increase this to around 30% by the end of June 2025 (where regulatory rules would trigger a mandatory takeover in Germany).
- UniCredit CEO Andrea Orcel is on the fence regarding a full takeover at the current share price, citing the surge in Commerzbank's stock price as not reflecting the bank's true fundamentals. He has until 2027 to make a final decision.
- The German Federal Cartel Office has until July 2025 to approve or block the merger. Commerzbank's significant 20% market share in SME loans raises antitrust concerns, potentially delaying or altering the approval process.
- UniCredit's financial position is becoming precarious, with a Common Equity Tier 1 (CET1) ratio of 14.7% dangerously close to the regulatory minimum. Crossing the 30% ownership threshold could force them into dilutive equity raises or asset sales, posing potential risks.
- The political climate in Germany is a wildcard. The merger touches on sensitive national interests, and the deal's progress may be impeded by both popular and governmental resistance to cross-border consolidation in the European banking sector.
The strategic move by UniCredit to potentially increase its ownership in Commerzbank signals an ambition to strengthen its presence in the German finance industry and expand within the European banking sector. However, the merger faces obstacles, as the German Federal Cartel Office needs to approve or block it, considering the significant market share Commerzbank holds in small and medium-sized business loans, which raises antitrust concerns. Meanwhile, UniCredit's financial position, with a Common Equity Tier 1 (CET1) ratio close to the regulatory minimum, could be put at risk upon crossing the 30% ownership threshold.
