Commerzbank CEO says Europe needs bigger banks, but conditions not right

LONDON (Reuters) -COMMERZBANK-UNICREDIT-e68bffe8-949f-4244-b8ab-76fcfffe3e84>Commerzbank's CEO said on Wednesday that Europe needed bigger banks to compete with U.S. rivals, but repeated that her own company was better off alone in the face of interest from Italian bank UniCredit.

"If you compare the size of U.S. banks with European banks there is a difference and size matters specifically when it comes to large investment projects," COMMERZBANK-UNICREDIT-e68bffe8-949f-4244-b8ab-76fcfffe3e84>Commerzbank CEO Bettina Orlopp told the FT Global Banking Summit. "The more you have complementary markets the more interesting it is."

However, she said the lack of a European banking union and a common deposit protection scheme meant that extracting benefits from a cross-border banking deal was currently "very difficult". She said COMMERZBANK-UNICREDIT-e68bffe8-949f-4244-b8ab-76fcfffe3e84>Commerzbank would be keen on discussing with rivals about tie-ups, but only if there was a banking union.

"When you talk about cross-border consolidation, benefits are very difficult to get without a banking union," she said.

UniCredit in September snapped up a stake in Germany's COMMERZBANK-UNICREDIT-e68bffe8-949f-4244-b8ab-76fcfffe3e84>Commerzbank and Italy's No. 2 bank has been pressing for a tie-up since, a move that triggered opposition in Germany.

Orlopp said COMMERZBANK-UNICREDIT-e68bffe8-949f-4244-b8ab-76fcfffe3e84>Commerzbank would explore options with any shareholder, including UniCredit, but was yet to receive a proposal.

The lack of a euro zone-wide banking union and common deposit protection scheme has been cited by banking executives and supervisors as a major impediment to banking dealmaking in Europe.

Orlopp said that without such schemes in place, the principal location of a bank mattered, especially "in a crisis situation" when clients demanded access to credit lines.

UniCredit CEO Andrea Orcel's interest in COMMERZBANK-UNICREDIT-e68bffe8-949f-4244-b8ab-76fcfffe3e84>Commerzbank has created concerns in Germany that key functions and decision making would shift to Milan after a takeover.

In Italy, there are concerns that, in order to overcome German opposition, UniCredit could offer to move its central functions there, a possibility Orcel has ruled out.

Orlopp on Wednesday also said she was open to more smaller-scale acquisitions next year but expected shareholders would prefer COMMERZBANK-UNICREDIT-e68bffe8-949f-4244-b8ab-76fcfffe3e84>Commerzbank to return capital than spend it on deals.

(Reporting by Tommy Reggiori Wilkes; Editing by Simon Jessop, Mark Potter and David Evans)