Italy’s UniCredit has outperformed expectations in its third-quarter earnings, raising its profit forecast and intensifying discussions around a potential acquisition of Germany’s Commerzbank. This comes as both banks highlight their financial resilience and strategic goals amid heightened speculation of one of Europe’s most significant banking mergers since the financial crisis.
UniCredit, Italy’s second-largest bank, has secured a considerable stake in Commerzbank, a move that has stirred Germany’s banking sector and prompted Commerzbank to fortify its independence. In response, Commerzbank increased some of its financial targets on Wednesday, underscoring its commitment to fend off a takeover. Chief Executive Bettina Orlopp confirmed that UniCredit has requested further discussions, while UniCredit CEO Andrea Orcel suggested that a decision regarding a full takeover could emerge within the next year.
Strong Third-Quarter Results Bolster UniCredit’s Position
UniCredit’s third-quarter results exceeded market expectations, showcasing the bank’s robust financial footing. The bank announced plans to maintain a profit target exceeding €9 billion ($10 billion) through 2025 and 2026, replicating its recently raised 2024 goal. This forecast aligns with UniCredit’s commitment to increase cash returns to shareholders, with plans to distribute half of its net income as dividends starting next year, up from the current 40%.
UniCredit’s stake in Commerzbank aligns with its strategic objective to streamline its presence in Germany, a market where it has previously performed well. Orcel described the German business as a “mirror image” of Commerzbank, arguing that a merger could unlock further growth for both entities. Orcel assured German stakeholders that decision-making would remain local, with operations led by an “empowered German legal entity.”
The acquisition has generated mixed reactions in Germany, where cross-border banking consolidation has traditionally faced resistance. Nonetheless, UniCredit’s steady results and commitment to preserving German operational autonomy are aimed at easing these concerns.
Commerzbank Focuses on Growth and Independence
As UniCredit positions itself for a possible takeover, Commerzbank is striving to demonstrate its resilience and growth potential. Although Commerzbank reported a 6.2% decrease in net profit to €642 million—primarily due to weaker interest income and higher risk provisions—its earnings still outpaced analysts’ forecasts. Additionally, the bank raised its outlook for net interest income to €8.2 billion for the full year and lifted its commission income growth target from 4% to over 5%.
“This demonstrates that our growth strategies are delivering results,” Orlopp stated, emphasising the positive impact of Commerzbank’s strategic initiatives.
Next Steps and Market Reactions
UniCredit’s Orcel has hinted at the possibility of an unsolicited offer should negotiations falter, stating that “hostility” is subjective in such cases. The bank does not require European Central Bank approval to increase its stake to 21% before pursuing a full takeover, as Orcel clarified that such regulatory processes would proceed independently.
Despite initial optimism, shares in UniCredit fell by 1.3%, while Commerzbank shares dropped 2.3%, underperforming broader gains in the banking sector fueled by recent political developments in the United States. Still, analysts at KBW have maintained an “outperform” rating for UniCredit, pointing to the bank’s strong performance relative to the STOXX Europe 600 Banks index.
Orcel has emphasised that UniCredit remains open to walking away from the deal if it does not serve the interests of its shareholders, signalling a cautious yet determined approach to potential consolidation. For now, both banks remain focused on reinforcing their financial positions while evaluating what could become a defining moment in European banking.
