To paraphrase the old heaven and hell joke about Europe, it would fit the clichés if in heaven Italians ran the restaurants and Germans ran the banks, while in hell, it would go the other way around.
So it seems counterintuitive for the biggest Italian bank UniCredit to be contemplating a bid for Germany’s No. 2, Commerzbank. That is, it would be except that Germans, for all their reputation for efficiency and engineering, are really not very good at running banks.
UniCredit has reportedly made informal inquiries with the German government, which remains Commerzbank’s biggest shareholder after bailing it out in 2009 in the wake of financial crisis. Both UniCredit and Commerzbank declined comment on the news, first reported by Reuters. One person familiar with the talks told Handelsblatt they are at “a very early stage.”
The Finance Ministry in Berlin, when asked for comment, simply said it didn’t want to remain a shareholder in the German bank forever and would like to get a good deal for taxpayers when it unloads the stake. That might be because it has somebody else in mind. Handelsblatt’s sister publication WirtschaftsWoche reported on Thursday that France’s BNP Paribas, which has signalled interest in the past, could be the government’s preferred partner.
It’s looking less likely than ever that Commerzbank will continue to go it alone.
Commerzbank has been ailing for decades, alternately sick and convalescent, with countless new chief executives optimistically being called in to restructure and reorient the chronically underperforming institution. The latest effort under Martin Zielke as CEO and Klaus-Peter Müller as board chairman has so far not been any more successful than the earlier attempts.
Even before the financial crisis, Commerzbank was a perennial also-ran as No. 3 among the Big Three postwar “Grossbanken,” in a country that really had room for only two such big banks. Deutsche Bank and Dresdner Bank had most of the good corporate relationships, while the savings banks in Germany’s multi-tiered banking system dominated retail banking. By the time Commerzbank was able to take over a vastly shrunken Dresdner from its new owner Allianz in 2009, there was really only room for one big bank in Germany.
In that sense, a cross-border merger could make a lot of sense amid a wide-ranging consolidation of the industry in Europe. Implementation of a Single Supervisory Mechanism at the European Central Bank to monitor the European Union’s biggest banks facilitates such links. UniCredit has already had success in its takeover of HypoVereinsbank, the large regional bank headquartered in Munich.
For all of the lip service paid to European integration by German politicians, there could be political obstacles to a UniCredit takeover of Commerzbank. For one thing, UniCredit itself will win no prizes for efficient management. It is in the middle of massive restructuring of its own as it works through billions in bad loans. For another, Italy has raised some hackles in Germany for recently rescuing a couple of ailing banks in violation of new EU rules on how to handle these cases.
That’s part of the reason some bank experts would prefer a Franco-German solution. Unicredit needs another two years of restructuring before it’s ready. The hurdles for BNP Paribas wouldn’t be as high, said analyst Daniel Regli of Mainfirst.
Despite such grumblings, this would hardly be a merger of equals. UniCredit is currently valued at €40 billion on the stock market – about three times as high as Commerzbank. Italy’s banks may still be sitting on a mountain of bad debt, but Germany’s banks have become notoriously costly and unprofitable.
In any case, it’s looking less likely than ever that Commerzbank will continue to go it alone. It emerged a year ago that top executives at Deutsche and Commerzbank had held preliminary talks about a possible merger of the two, but shelved the project until both had gotten their houses in order. Investors in Deutsche Bank, in the meantime, have been growing restive at the lack of improvement at Germany’s biggest bank. As Commerzbank’s takeover of Dresdner showed, combining forces doesn’t really solve the problems.
Darrell Delamaide is an editor for Handelsblatt Global based in Washington DC. Andreas Kröner, Martin Greive and Jan Hildebrand of Handelsblatt contributed to this story. To contact the author: email@example.com
This story was updated Thursday with news of BNP Paribas’ possible involvement.