MILAN (Reuters) – UniCredit’s investment in German rival Commerzbank has laid the foundations for a dialogue to explore the possibility of a merger, UniCredit Chief Executive Andrea Orcel said on Thursday.
The investment has value whether it leads to a merger or not, Andrea Orcel said on Bloomberg TV, the day after his bank announced its acquisition of 9% of Commerzbank.
He added, however, that a merger of the two groups could create more value and said Europe needed bigger banks.
“It’s very easy to engage with all the relevant stakeholders and see whether the basis for a merger is there or not,” he said.
“Given the fragmentation of the market, we believe there is room in Germany to create value through consolidation,” he added.
UniCredit has been present in Germany since 2005, when it bought the Bavarian bank HVB.
The Milanese bank had been interested in Commerzbank even before the acquisition of HVB. In recent years, it has repeatedly studied the possibility of a merger, keen to achieve potential savings through a presence in Germany.
In a note to clients on Thursday, analysts at JP Morgan said a merger could boost the group’s German operations by moving them from a regional to a national level.
However, potential political obstacles and risks are significant.
“We note that any M&A deal could still fail due to price, lack of government support, possible risks in how the deal is executed, particularly with regard to cost cutting,” JP Morgan analysts said.
“Moreover, we do not believe that M&A in Italy is completely excluded and, depending on the evolution of the share price, it could represent another possible outcome,” they added.
Andrea Orcel said UniCredit began buying Commerzbank shares on the market over the summer, as speculation grew that the German government might sell its 16% stake.
“When the government decided to do it, we were among the investors that the State called to sell its stake, we made an offer, which was accepted in its entirety, and we went from 4.5% to 9% in one go,” he detailed.
(Reporting by Valentina Za; by Florence Loève, edited by Kate Entringer)
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