Published : 1 month ago, on 06/11/2024

By Tom Sims and Valentina Za

FRANKFURT/MILAN (Reuters) – Germany’s Commerzbank raised some financial targets and said its plan for growth was working as it tries to fend off a possible takeover by Italy’s UniCredit, which reported another forecast-beating quarter on Wednesday and hiked its own profit goal.

The third-quarter numbers are the first since Italy’s No. 2 bank disclosed it had snapped up a hefty stake in Commerzbank and began pressing for a possible tie-up. Commerzbank, which is Germany’s No. 2 bank, has been honing its defence as it seeks to stay independent and avoid what would be one of the largest European banking deals since the global financial crisis.

Both banks sought to underline their financial strength in results on Wednesday.

UniCredit, led by CEO Andrea Orcel and awaiting supervisory approval to become the main investor in Commerzbank, raised its profit outlook and said it would start paying out half its net income to investors in cash from next year. The bank said its net profit for the July-September period totalled 2.51 billion euros, beating an average forecast of 2.27 billion euros.

Commerzbank reported a net profit fall of 6.2% to 642 million euros, better than analysts on average had expected but dragged down by a fall in interest income and a rise in risk provisions.

Nevertheless, the bank raised its outlook for net interest income and commission income for the full year.

“This shows that our growth initiatives are increasingly paying off, thanks to the very consistent implementation of our strategy,” Chief Executive Bettina Orlopp said.

The bank raised its 2024 forecast for net interest income to 8.2 billion euros, up from a previous projection of 8.1 billion. Commission income is now seen rising more than 5%, better than an earlier forecast of 4%.

UniCredit’s move for Commerzbank has sparked widespread opposition in Germany and marks a major test for Europe’s willingness to see through long-awaited cross-border banking consolidation.

Orcel said on Wednesday he was confident that “people will look at facts” in relation to a potential deal with Commerzbank despite the backlash, saying they were positive for Germany, Europe and even Commerzbank.

The Italian CEO also told CNBC in an interview that the path to a deal would be long, with no conclusion in the short term.

Shares in UniCredit rose 2.2% in early trading, outperforming a rally across European banking stocks fuelled by Donald Trump declaring victory in the U.S. presidential election. Commerzbank shares fell 0.6%.

($1=0.9301 euros)

(Reporting by Tom Sims and Oliver Hirt in Frankfurt and Valentina Za in Milan; Writing by Tommy Reggiori Wilkes; Editing by Rachel More, Clarence Fernandez and Tomasz Janowski)