The Spanish banking sector has been studying for months the takeover bid by BBVA for Banco Sabadell, which could lead to the merger of two of the largest Spanish entities and which the government opposes because it could further accentuate the lack of competition in the local financial system. But in Europe, this corporate operation, which is only a few months old, has faded into the background. The leading role has gone to the Italian bank Unicredit, which, in a move that few expected, has taken control of 9% of the German entity Commerzbank, which would create the fifth largest banking entity in Europe.
Unicredit has acquired 9% of Commerzbank in recent weeks. On the one hand, it bought shares on the market and, on the other hand, it retained around 4.5% of the bank’s shares that were in the hands of the German state. Both moves were made through a local bank that it already owns, HypoVereinsbank, which is smaller than Commerzbank and which it has controlled since 2005.
A little over a week ago, the Federal Executive announced that it was going to sell part of its stake that it had held since the great crisis of 2008. It then had to save the bank – it put up more than 18,000 million euros – and it became a major shareholder. Last September, Olaf Scholz’s government wanted to make cash by selling 4.5%, even though it still holds 12% of the bank.
The German government justified the privatization by saying that “Commerzbank is once again a stable and profitable institution,” said State Secretary for Finance Florian Toncar. “The government will gradually sell its shares. “The reduction of the federal stake in Commerzbank is a sign of its strength and that of Germany as a financial center.” Today, this sale project could stop because they were not expecting a transalpine buyer.
The original idea behind this operation was Andrea Orcel, an old acquaintance of the Spanish financial scene. In September 2018, Santander chose the former CEO of the investment bank UBS to take over the Spanish entity. An election that lasted for months. In January 2019, it gave up hiring Orcel due to the “unacceptable” cost of his signing, estimated at 60 million dollars (the current equivalent of 54 million euros). The failed contract ended up in court, as Orcel demanded compensation for not following through with his contract.
Reactions against
What is relevant in Unicredit’s move is that if, in addition to these 9%, it continues to buy shares – it has already stated that this is its intention – the purchase of Commerzbank could lead to the first major merger between two European entities from different countries. and, moreover, systemic due to their weight in the eurozone. That is, in the first major European banking merger. But it is not certain that this will end up happening because of the strong opposition it has aroused in Germany, where Commerzbank controls more than a third of German foreign trade payments, has almost 25,000 companies among its customers and has more than 42,000 employees. according to data published by Reuters.
The first suspicions come from the Scholz government itself, which would not have appreciated the lack of communication from Unicredit about its intentions to take over 9% of Commerzbank, as a first step to control the entity, according to information published by the German press. Nor from the opposition, which hopes that the government will react and stop selling the entity’s shares.
Workers’ representatives have also spoken out against the move. The Ver.di union, which represents professionals in the service sector, has said it is “tooth and nail” opposed to “a possible merger of all decision-making bodies”. “If necessary, we will also organise public demonstrations,” its leaders said in statements reported by the FT. This opposition is relevant because listed German companies have a supervisory board, alongside the board of directors, which includes the unions and must give an opinion on the companies’ strategic decisions.
In the midst of this fierce struggle, an alternative presents itself: attempting an integration between Commerzbank and Deutsche Bank. This merger was already sought in 2019. The aim was for Germany to have a stronger banking mega-entity capable, precisely, of leading a possible European merger dance. However, this measure failed because regulators warned of the market domination that this could entail and because the unions were also not in favor of the layoffs that this would entail. Today, Deutsche Bank is once again considered a buyer of the 12% of Commerzbank that the State still owns, but it must be remembered that Deutsche Bank is not in its best moment either and has experienced complicated situations in recent years, among other reasons, due to its high exposure to investment banking.
And the ECB, in favour
The one that is clearly in favour of an operation is the European Central Bank, not because until now there have been no integrations of banks from different countries in the eurozone, but because these have not allowed the creation of large entities capable of competing with the American or Asian ones. “An agreement would satisfy those who expect cross-border mergers,” suggested last week the president of the ECB, Christine Lagarde, in a message that shows that the supervisory body is not going to put up obstacles.
Many voices have been campaigning for these transnational mergers for years, without any entity having taken up the challenge. For example, that of the Vice-President of the ECB and former Minister of Economy, Luis de Guindos. “We are in favour of consolidation in Europe, with a very favourable vision of cross-border consolidations, between banks of different nationalities of origin”, he said a few months ago.
There are no mergers, among other reasons, because there is no deposit guarantee fund at the Eurozone level, because the states have not agreed to create it. That is to say, if they are poorly given, each country is the one that guarantees a minimum of funds to the depositors of its local banks. In Spain, up to 100,000 euros. And if there is no common framework – as is the case for banking supervision – it is difficult for banks to evolve. Unicredit has now taken the step, but the decision will depend on the German government. This has general elections in 2025, at the height of the rise of the extreme right, and getting there with a saved bank that passes into the hands of an Italian entity does not seem to be an advantage for it.
