Unicredit vs. Commerzbank: The hunting season in the European banking market has begun – and what all this has to do with the UBS-CS deal
The major Italian bank wants to acquire the German “Mittelstandsbank”, but only if Berlin and the whole of Germany do not raise a fuss. But that is what it looks like they will. The “test case for Europe” could turn into a failure.
The Unicredit headquarters towers over Milan.
Image: Stefano Porta / AP LaPresse
Is Europe ready for the internal market? 31 years after the EU countries sealed it in the Maastricht Treaty, there is still no clear answer. The internal market is unfinished, particularly in the financial sector. The banking system has remained largely national. There are no banking giants of American proportions on the old continent.
UBS wants to change that, and says it is emulating the long-established Wall Street bank Morgan Stanley. Former UBS manager Andrea Orcel is now also aiming for a quantum leap with his Unicredit. In recent weeks, the 61-year-old Italian has approached the German Commerzbank without any feigned politeness and says he has already directly or indirectly bought up more than 20 percent of all shares in the German corporate financier known as the “Mittelstandsbank”.
Orcel says Unicredit could combine Commerzbank with its existing German subsidiary Hypovereinsbank in Munich and together “achieve great things”. The manager points to the great progress that the group he leads, and Hypovereinsbank in particular, has made in terms of profitability and efficiency over the past three years.
Aggressive: Unicredit boss Andrea Orcel.
Image: Mondadori Portfolio / Editorial
Of course, he is only too happy to ignore the fact that the European Central Bank raised its key interest rate from 0 percent to 4.5 percent between 2021 and 2023, thus allowing all banks to significantly expand their profit margins in the lending and deposit business.
However, it is a fact that there are many banks and “too many bankers” in the German banking market who believe that the industry is not very efficient, as Raimund Röseler, head of the German supervisory authority Bafin, stated four years ago.
In 2021, renowned British banking analyst Stuart Graham also told CH Media that the fifteen largest banks in the euro area had a combined market share of just 45 percent. In an adjusted market without overcapacity, this share would barely leave enough room for four major banks.
CS explosion with consequences for Europe
Since then, however, there have been no major bank takeovers or mergers in the eurozone. Instead, there was a big bang in Switzerland with the takeover of Credit Suisse by UBS in March 2023. The process has not been without consequences for the European banking market either. On the one hand, it may have had a motivating effect on managers striving for greatness, such as Andrea Orcel. On the other hand, it can be assumed that it has made authorities and governments more cautious.
We remember: When Credit Suisse was already in trouble in 2022, the American and British authorities prohibited the bank from transferring equity capital from New York and London to Zurich through organizational changes in order to give the cash-strapped parent company more breathing room. “In times of crisis, governments and their authorities resort to nationalistic actions,” says a banking expert who wishes to remain anonymous and who has gained this insight over many years in top positions.
The problem is not made any smaller by the fact that the European banking union is still not complete. There is no common guarantee system for bank deposits. Without a cross-border liability community, national authorities have little choice but to act jealously and put obstacles in the way of banks investing capital across national borders.
Orcel: “A test case for Europe”
That is why Orcel said yesterday in London: “Our approach to Commerzbank is a test case for Europe.” The manager only wants to go ahead with his takeover plan if he can be sure of sufficient support from politicians and all other stakeholders. In Berlin, however, enthusiasm for Orcel’s advance is very limited. Much like five years ago, when Deutsche Bank expressed interest in its neighbor, but this fell on deaf ears in politics. The unions are also on high alert today, as they were then. A takeover of Commerzbank could lead to the elimination of two thirds of the 42,000 jobs, it is said.
Orcel will have to do a lot of convincing for his project. However, he will hardly be able to score enough points with the usual reference to the much larger US banks. And rightly so: European banks specialize in balance sheet business, i.e. loans. In the USA, a large part of corporate financing takes place on the capital market.
For this reason alone, transatlantic bank comparisons are a tricky business. But managers on both sides have the same ambition and pride in managing the largest possible structures. That is why others of his ilk could join the hunting season opened by Andrea Orcel in the European banking market.
