A new big deal has “imperceptibly” begun to take shape in the European banking sector, exactly sixteen years after the global financial crisis that broke out in the US (on September 15, 2008, Lehman Brothers collapsed) and shook Europe to its foundations.
On September 11, 2024 it became known that the Italian UniCredit acquired a 9% stake in the German Commerzbank acquiring nearly half of the bank’s shares that were put on the market by the German government.
Last Monday it became known that UniCredit had already acquired an additional 11.5% stake in Commerzbank, raising its stake in the German bank to 21% and causing panic in Berlin.
Officials in Olaf Scholz’s government and politicians from all parties in Germany had from the outset expressed concern about the unexpected developments in the country’s stagnant, unsettled and opaque banking landscape. OK, UniCredit is almost twice as profitable as Commerzbank.
It also has more than three times the stock market value (67 billion euros against 20). But it is a bank based in a country that has a public debt of 140% of GDP.
It is reasonable to suspect that the first alarm bell was rung in Berlin due to German prejudices against the European South.
Economies of scale with layoffs
The second bell rang for guild reasons. Because in addition to the German political class that characterized UniCredit’s move as “unfriendly”, the largest German employees’ union, Verdi, was also deeply concerned.
The concern of the powerful union – it is the equivalent of IG Metall in the services sector – is about the certainty that a full merger of the banks would bring about the infamous for workers (but firmly intended by managers and shareholders) “economies of scale”. In other words, it would bring layoffs. “In large business groups the addition of one plus one does not add up to two” a Commerzbank executive told the Financial Times.
In addition, a major fear of Germans (politicians, trade unionists and workers) is the possible disastrous impact that Commerzbank’s “change of character” will have on domestic small and medium-sized enterprises and, by extension, on the German economy and society itself.
Because Commerzbank is the largest creditor of Germany’s small and medium-sized enterprises, which form the backbone of Europe’s largest economy. Its clientele includes more than 25,000 medium-sized businesses and it is present in 30% of the country’s export trade.
The transitional stage and “Germanness”
Aware of German obsessions, UniCredit CEO Andrea Orschel assured in a reassuring statement that he has no intention of joining the board of Commerzbank, 12% of which is still held by the German government as a “residue from the bailout of 2008”.
In any case, the “Financial Times” estimates that a transitional stage of the deal could be the sale of HypoVereinsbank, UniCredit’s German subsidiary, to Commerzbank. “Such a move would be more politically acceptable in Germany, as Commerzbank would retain its ‘Germanness’ while UniCredit would be its main shareholder,” the newspaper estimated.
They applaud with an eye on unification
However, neither the markets nor the European Central Bank nor the partners in Brussels share the German reservations.
First of all, in the first ten days after the news that UniCredit entered dynamically into the share capital of Commerzbank, the stock of the former strengthened by 5%, while that of the latter jumped 24% higher.
Besides, in Frankfurt, where the ECB is based, the feelings are diametrically opposed to those prevailing in Berlin.
Christine Lagarde herself did not hide her excitement at the prospect of a major banking deal that would advance the much-desired goal of unifying the European banking sector.
Similar feelings of satisfaction prevail in Brussels, a few days after the “savior of the euro” Mario Draghi published his much-vaunted report on boosting the competitiveness of the euro economy.
The “nationalist” model is not sustainable
“Super Mario” explained thoroughly that with the European business and banking sector fragmented and with European governments taking care to create, maintain and reward so-called “national champions”, the EU has no chance on the international stage.
It is obvious that the purely “nationalist” model of more than 1,700 local and cooperative banks operating in Germany without any supervisory control from the ECB is not sustainable in the 21st century of relentless competition even between geostrategic allies such as the US and the EU Draghi proposed strengthening protectionism, but at the European level. Not nationally.
Andrea Orcell: Redemptive scenario for the manager
One could say that the architect and mastermind behind UniCredit’s dynamic participation in Commerzbank, Andrea Orcell, picked up where he left off 17 years ago. In 2007 the current manager of the Italian bank was the orchestrator of the previous “big banking deal”. As a consultant, then, to the American Merrill Lynch, he planned and organized the acquisition of the Dutch ABN Amro by the British Royal Bank of Scotland.
It was an extremely ambitious plan which, in addition to its complexity as the Dutch bank would “break” in two, had the misfortune of being launched at an absolutely negative moment, since in the summer of that year two mutual funds in the USA “exploded” they were the fuse of the global financial crisis. The Dutch-British banking deal ended in disgrace, with the London government proceeding with a “shameful bailout of RBS, then the world’s largest bank by assets,” as Patrick Jenkins writes in the Financial Times.
Now the chief executive of UniCredit, the 61-year-old banker is leading the new, after so many years, effort for a major cross-border banking deal in Europe. A “deal” that would be “redeeming for Orcelle, who is distinguished not so much for his technocratic skills and determination as for his crafty charm,” as the “FT” columnist and former correspondent for two decades writes. of the British newspaper in Frankfurt.
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