UniCredit’s Chief Executive Andrea Orcel said that the Italian lender may consider selling its huge holding in Germany’s Commerzbank if a non EU buyer is willing to pay a fair price and the shareholders agree.
These comments highlight both UniCredit’s ambitions as well as its limitations to redefine the role of the bank in Europe. They were published on Saturday by the Frankfurter Allgemeine Zeitung.
UniCredit is the biggest private investor of Commerzbank, having acquired a 26 percent stake in this German bank over the past year.
UniCredit has publicly called for a possible merger of the European Banking Sector.
Commerzbank, and the German Government, who owns 12 percent of the lender, have both dismissed this concept.
Priority is given to the interests of shareholders
Orcel stated that the political interests of UniCredit would not dictate decisions, as an investor should.
He said that UniCredit will seek to exit the market if investors no longer believe in Commerzbank’s shares.
What would happen if an EU bank offered the most for our shares?” Orcel is quoted as saying: “I would have to accept this offer because I owe it to my shareholders.”
In the statement, the CEO emphasizes his pragmatic approach. He balances a strategic vision for a stronger European Banking Sector with the fiduciary obligation to provide returns to investors.
Orcel acknowledged that such a deal may not have been in his best interest but emphasized that, “in the final analysis, market rules would win out.”
These remarks show the contradiction between the goals of European bank consolidation and the realities of the capital markets.
Commerzbank resists UniCredit’s push
These remarks are also in context with Commerzbank rejecting UniCredit’s advances.
Commerzbank, in spite of the Italian bank’s increasing shareholding, has consistently fought against integration efforts, citing national interests and strategic independence.
Berlin’s continued opposition to an acquistion impedes UniCredit’s plans. This is a sign of a potential political barrier to consolidation across borders within the EU.
The German approach is a reflection of a wider reluctance by the country to let significant banks in its own territory be acquired by foreigners.
Commerzbank has been deemed vital to Germany’s economy. The government stated repeatedly that they intend to maintain influence on the future of the lender.
Market realities meet strategic vision
Orcel positions UniCredit to be a catalyst of European bank consolidation. It suggests that large, multinational organisations will need to compete on a global scale.
This larger goal is reflected in his push to form a partnership between Commerzbank and him.
The CEO’s position has been weakened by his admission that he would accept an offer from a non EU bidder for the stake.
Orcel’s delicate balance is exemplified by the dual message that favours a European Champion while acknowledging the possibility of a global buyer.
He made it clear that while he’d love to merge UniCredit with Commerzbank, he wouldn’t be opposed to an exit if the mood of shareholders changed.
The implications for European Banking
It is possible that the fate of UniCredit’s Commerzbank stake will be an important litmus test to determine the future of banking consolidation across borders in the EU.
The European Commission always promoted increased banking integration, but national governments prefer to retain control.
UniCredit shares could be sold to an entity outside the EU, displaying both its best and worst aspects of Europe’s financial fragmentation.
This episode serves as a reminder to investors that returns always trump politics.
It begs for policymakers to ask if Europe does enough to develop its own champions of banking in an overwhelmingly scale-driven world market.
Look ahead
Orcel is continuing to push for the consolidation of European banks based on a strong UniCredit 26% share.
Investor patience and Berlin’s political will could determine whether this ambition comes true.
Orcel admitting that he’d be open to a non EU proposal that maximized shareholder value shows that UniCredit is flexible, even though it may undermine the European focus that Orcel has pushed for.
As new information becomes available, this post UniCredit CEO sells Commerzbank shares outside EU on shareholders’ demand could be updated.
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