A man holds up an umbrella to protect himself from the rain as he walks past the euro symbol in front of the former European Central Bank (ECB) building in Frankfurt am Main, western Germany.
Kirill Kudryavtsev | AFP | Getty Images
The latest takeover battle in Europe’s banking industry is widely seen as a potential turning point for the region and in particular the European Union’s imperfect banking union.
Italy’s UniCredit has stepped up pressure on Frankfurt-based Commerzbank in recent weeks, seeking to take a 21 percent stake in Germany’s second-largest bank to become its largest investor.
The Milan-based bank, which acquired a 9% stake in Commerzbank earlier this month, appears to have surprised German authorities with a potential multi-billion-euro merger.
“The long-discussed move by Italy’s largest bank, UniCredit, to take control of Germany’s Commerzbank marks a watershed moment for Germany and Europe,” David Marsh, chairman of OMFIF, a London-based group that tracks central banks and economic policy, said in a written commentary on Tuesday.
Whatever the outcome of UniCredit’s attack on Commerzbank, Marsch said the incident poses “another major test” for German Chancellor Olaf Scholz.
The embattled German leader is firmly opposed to the takeover attempt and has reportedly described UniCredit’s move as an “unfriendly” and “hostile” attack.
“The dispute between Germany and Italy over the UniCredit takeover bid, which Mr Scholz has denounced as hostile behaviour, risks worsening relations between two of the European Union’s Big Three member states,” Marsh said.
“Middle ground may still be found,” he continued, “but growing hostility in Italy and Germany could undermine meaningful steps toward completing the banking union and capital markets integration that all sides say is needed to pull Europe out of recession.”
What is the European Banking Union?
Drafted in the wake of the 2008 global financial crisis, the European Union’s executive arm announced plans in 2012 to create a banking union to ensure lenders across the region were stronger and better supervised.
The project was realised in 2014 when the European Central Bank assumed the role of banking supervisor, but is widely considered to be incomplete: the lack of a European Deposit Guarantee Scheme (EDIS), for example, is one of a number of factors cited as impediments to progress.
European leaders, including German Finance Minister Olaf Scholz, have repeatedly called for greater integration in Europe’s banking sector.
OMFIF’s Marsh said Germany’s opposition to UniCredit’s bid to buy Commerzbank meant that Germany “is now being accused of supporting European banking consolidation only on its own terms”.
A German government spokesman did not immediately respond to CNBC’s request for comment.
The logo of German bank Commerzbank can be seen on a branch near the Commerzbank Tower in Frankfurt.
Daniel Roland | AFP | Getty Images
Hostile takeovers are not common in European banking, but Spanish bank BBVA shocked markets in May when it launched an all-stock takeover bid for domestic rival Banco Sabadell.
Reuters reported that the head of Banco Sabadell said earlier this month that BBVA had very low chances of succeeding in a multi-billion euro hostile takeover bid, but BBVA CEO Onur Jeng told CNBC on Wednesday that the deal was “progressing according to plan.”
Spanish authorities, who have the power to block bank mergers and acquisitions, have expressed opposition to BBVA’s hostile takeover bid, citing the potential negative impact it could have on the country’s financial system.
European policymakers have been working on creating a “true banking union” for more than a decade and will continue to do so, Mario Centeno, a member of the European Central Bank’s governing council, said Tuesday on CNBC’s “Street Signs Europe.”
According to the Brussels-based think tank Bruegel, the fact that the project remains unfinished means that the framework for intervening in the banking crisis remains an “awkward mix” of national and EU authorities and instruments.
Asked whether comments against bank merger by leading politicians in Germany and Spain were causing discontent, ECB President Centeno replied: “We have worked hard to complete banking union in Europe. We all know that there are still some challenges ahead.”
What happens next?
Thomas Schweppe, founder of Frankfurt-based consulting firm 7Square and a former Goldman mergers and acquisitions banker, said Deutsche’s decision earlier this month – whether intentional or not – to sell a 4.5% stake to UniCredit means the bank is now “embroiled” in a possible takeover.
“I think we are proposing a European banking industry, and Germany is a big supporter of strong, well-capitalized and well-run European banks,” Schweppe said Wednesday on CNBC’s “Squawk Box Europe.”
“If we are serious about this, I think we also have to accept that European integration means that German banks will be on the receiving end of acquisitions,” he added.
Asked how long the UniCredit-Comerzbank dispute could drag on, Schweppe said it “could take several months, if not a year or more,” noting that a lengthy regulatory process would require talks to find a solution that is “satisfying” for all stakeholders.
