Exclusive-Commerzbank considers buying German rival to ward off UniCredit, sources say

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By John O’Donnell, Emma-Victoria Farr and Tom Sims

FRANKFURT (Reuters) -Commerzbank is considering buying a mid-sized German bank as part of its strategy to fend off a possible takeover by Italy’s UniCredit, three people with knowledge of the matter told Reuters.

The plans are at an early stage and possible targets could include Hamburg Commercial Bank (HCOB) or Oldenburgische Landesbank (OLB), said two of the people, who all spoke on condition of anonymity about the private discussions.

Commerzbank’s deliberations are significant because the bank has been trying to devise a defence plan, so far revealing little other than that it was pursuing a standalone strategy.

A purchase could make Commerzbank a more complicated takeover for UniCredit as the Frankfurt-listed lender would already be busy integrating another bank. Tie-ups of this size are rare in Germany’s competitive banking landscape.

A possible acquisition has been discussed by Commerzbank management, the same two people said. It is unclear if it has approached the potential takeover targets as it hones its defence in an effort to remain independent.

Commerzbank said it was continuously monitoring inorganic growth opportunities but declined to comment on any targets.

Its CEO Bettina Orlopp said last week that Commerzbank is “keeping powder dry for potential acquisitions”.

OLB and HCOB, which both have around 32 billion euros in assets, declined to comment on any Commerzbank approach.

It is unclear if Commerzbank has the time or investor support to embark on a domestic purchase but management is exploring all options, as it seeks to discourage UniCredit.

But if Commerzbank pulled off a deal before UniCredit has time to swoop, it could unravel a mooted cross-border merger which would be Europe’s biggest since the 2008 financial crisis.

Germany fears UniCredit’s plan could cost jobs and sway.

Shares in Commerzbank fell after Tuesday’s Reuters report, taking their loss on the day to as much as 4.1%. They had recovered to 15.69 euros at 1552 GMT, down 2.6% on the day.

Commerzbank’s Orlopp has said she was not going to engage in any “crazy” sell-downs or “stupid things”. Orlopp has, for example, dismissed the option of selling its Polish mBank unit, which Commerzbank attempted in 2020, another source said.

But some supervisory board members may, nevertheless, still raise the prospect of a sale at a meeting later this month, two people with direct knowledge of the matter said.

Germany is facing economic stagnation and political turmoil after the collapse of a three-party coalition, distracting Commerzbank’s strongest ally and heightening fears that UniCredit could swoop while the government is in disarray.

Italy’s No. 2 bank has been pressing for a tie-up after snapping up a hefty stake in September in the most ambitious attempt yet at a pan-European bank merger. But it faces considerable political hurdles ahead of German elections.

Commerzbank’s management, employees and the nation’s chancellor, Olaf Scholz, have all voiced opposition to a potential takeover of Germany’s No. 2 bank, but at least one big investor and some business leaders favour talks.

UniCredit CEO Andrea Orcel, who has long held an interest in a tie-up with Commerzbank, has said a combination would be the best outcome, but has not ruled out walking away.

A domestic tie-up may be more palatable to politicians in Berlin who have opposed an Italian takeover.

German insurance giant Allianz sold its 90% stake in OLB to Apollo in 2017 for 300 million euros ($319 million). OLB has been studying options for its future, including an IPO.

HCOB, previously known as HSH Nordbank and specialising in maritime finance, was bought in 2018 by J.C. Flowers and Cerberus Capital Management for around $1.2 billion.

The private equity backers have been assessing exit options for the business, sources have previously told Reuters.

(Reporting by John O’Donnell, Emma-Victoria Farr and Tom Sims. Editing by Anousha Sakoui, Elisa Martinuzzi and Alexander Smith)