UniCredit plotting bid for Commerzbank

UniCredit is reportedly preparing a multibillion-euro bid for a slice of Commerzbank in case its talks with Deutsche Bank fail.

The Financial Times, citing people familiar with the matter, said on Thursday that the Italian lender was seeking to come good on its long-running ambition to take-over Commerzbank and purchase a "sizeable" stake.

If successful, UniCredit would combine Commerzbank with HypoVereinsbank, the German lender it already owned, with the new lender based in Germany but UniCredit keeping its headquarters and listing in Milan.

Shares in Commerzbank were up 3% on the back of the report.

But there were at least two potential flies in the ointment, the talks that were already under way between Commerzbank and Deutsche and Berlin's likely aversion to seeing the country's second largest lender fall into foreign hands.

Nevertheless, according to the FT, the two German lenders were facing various potential snags to a tie-up, including the need to possibly have to raise as much as €10bn in fresh equity, taxes, and potential labour unrest over the expected job cuts.

And one of the persons advising UniCredit believed a combination of Commerzbank and HypoVereinsbank "makes sense for Germany as it would be presented as a national champion."

RBC Capital Markets said: "We see UC’s potential interest in CBK as a positive for CBK’s share price as it provides a plan B if talks with DBK fail.

"For DBK’s shares the news story is negative as it suggests that DBK might be under pressure to act faster than it might like or risk facing a stronger domestic competitor."

As regards UniCredit, despite having a good track record on cost cutting, it would be wiser to "see it focus on the continued de-risking of the Non-Core portfolio and organic cost reduction rather than embark on a complex deal that is likely to distract it from its current plan."