UniCredit launches Commerzbank bid as it posts record earnings
UniCredit's Strategic Moves and Financial Performance
By Valentina Za, Andrea Mandala and Tom Sims
MILAN, May 5 (Reuters) - Italy's UniCredit on Tuesday launched a bid to raise its stake in Commerzbank despite firm German opposition, as income derived from its holding in the rival contributed to record quarterly earnings.
Italy's second-largest bank improved its full-year financial outlook after profit rose 16% annually in January-March, and kicked off its 37 billion euro ($43 billion) buyout offer, the outcome of which it expects to announce by July 8.
UniCredit's Bid for Commerzbank
"If we do not acquire control as a result of the offer - the expected scenario to date - the status quo works well from our point of view," UniCredit Chief Executive Andrea Orcel told analysts.
"By our very presence, we are promoting an improvement of Commerzbank," he added.
UniCredit's shares rose 6% by 1218 GMT, outpacing Commerzbank's 4% gain.
Details of the Buyout Offer
Carrying a small premium when it was first unveiled and currently below Commerzbank's market price, the all-share bid aims to lift UniCredit's direct equity stake above 30%, from 27%.
Under German takeover rules, that would allow UniCredit to increase its holding further from next year through open-market purchases.
Commerzbank's Response and German Government Backing
Commerzbank, which has the backing of the German government in its fight to remain independent, said it would comment after reviewing the offer.
Germany's second-biggest bank will update its financial goals on May 8 after rejecting as a "restructuring proposal" a plan UniCredit presented last month to boost Commerzbank's performance.
MISSING OUT
Orcel's Acquisition Strategy
Orcel, a veteran dealmaker who arrived at UniCredit in 2021 after Santander withdrew its offer to make him CEO, is yet to clinch an acquisition despite several attempts.
He said that in Italy, where the industry is consolidating, he had worked on more options beyond the two publicly known: Banco BPM and Monte dei Paschi di Siena.
Potential Targets and Investment Approach
"So I would just feel that the missing out on Italy would be a voluntary missing out if returns do not match our cost of equity," he said.
Orcel has built stakes also in Greece's Alpha Bank and Italian insurer Generali.
Financial Impact of Investments
Some 400 million euros in dividends from the investments in Commerzbank and Alpha supported revenues in the first quarter, offsetting the drag from lower interest rates and the unwinding of UniCredit's profitable Russian business.
Orcel said Russia's contribution to profit would roughly halve this year versus 2025 to 400 million euros or less.
Record Earnings and Outlook
Quarterly Results
At 3.2 billion euros, net profit for January-March topped an analyst consensus estimate of 2.7 billion euros.
Earnings benefited from rising loan volumes, higher net fees, both on investments and the re-internalised life insurance business, as well as further cost cuts.
Future Profit Targets
UniCredit now targets a net profit of 11 billion euros or more this year, up from a previous forecast of "around" that level. ($1 = 0.8551 euros)
(Reporting by Valentina Za. Editing by Harikrishnan Nair, Mark Potter and Keith Weir)
