German government to retain stake in Commerzbank

Shares in Commerzbank AG traded lower early on Monday after the German government announced that it would hold on to its 12% stake in the European banking giant, likely halting its proposed merger with Italian lender UniCredit.

Germany's Finance Agency said on Friday that it would not sell any more shares in Commerzbank in the immediate future and noted that the bank's strategy was clearly "geared towards independence", seemingly indicating that it does not support the takeover of the country's second-biggest lender.

Commerzbank shares have rallied roughly 24% since 11 September, when UniCredit announced it had amassed a 9% stake in the German bank and expressed an interest in a merger. However, the Finance Agency's announcement now means that UniCredit was now unlikely to make a takeover offer anytime soon.

UniCredit's unexpected acquisition of Commerzbank shares has seen opposition from labour unions and prompted a defence strategy from Commerzbank itself.

As of 0925 BST, Commerzbank AG shares were down 4.82% at €14.92 each, while UniCredit shares were 1.25% lower at €37.52 each.

Reporting by Iain Gilbert at Sharecast.com