The Frankfurt headquarters of Commerzbank, one of Germany’s largest lenders.
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Why Germany Is Resisting UniCredit’s Takeover of Commerzbank

Despite an openness to cross-border mergers, Germany has pushed back against talk of the Italian lender UniCredit’s acquiring Commerzbank.

by · NY Times

Germans are eager to sell hundreds of billions of euros’ worth of goods in Italy, while drinking its wines, skiing its Alps and sunning on its beaches.

But in the weeks since UniCredit, a multinational bank based in Milan, swooped in to take a 21 percent stake in Commerzbank, one of Germany’s largest lenders, that fondness has been shown to have its limits.

With the looming threat of a takeover — potentially one of the most ambitious mergers in Europe since the 2008 financial crisis — union leaders, shareholders, industry associations and even Germany’s chancellor have floated reasons that they believe Commerzbank must remain German. Both banks will report quarterly results next week, with speculation about a possible union top of mind for investors.

Germany had no qualms when the German airline Lufthansa moved to add ITA Airways, Italy’s ailing national carrier, to its list of European acquisitions. And Chancellor Olaf Scholz has repeatedly called a banking union necessary to bolster the European Union’s competitiveness against China and the United States.

So the sharpness of the opposition from Berlin to the possible creation of a large, multinational European bank has raised eyebrows across Europe.

“There is really no rational reason to stop it, at least if you believe in the European Union, in the aim of Europe to be a global power among other global powers,” said Corrado Passera, an Italian banking executive who has overseen dozens of bank mergers.

Europe lacks a lender with the size and gravitas of those in China or the United States, he said, adding that if UniCredit merged with Commerzbank, Europe could finally have a bank large enough to be competitive in global markets.

But Commerzbank counts thousands of smaller and midsize German companies among its customers, and they are concerned that a large international bank will lose focus on their needs and the nuances of the domestic market. Bettina Orlopp, chief executive at Commerzbank, said she feared the bank would risk losing these customers if it merged with UniCredit.

“Relationships built up over many years and in-depth knowledge of the market are decisive factors in this respect,” she told the German economic media outlet Handelsblatt. “It should therefore be considered carefully whether to lightly give up relevant domestic institutions.”

The merger would require approval by the European Central Bank, the supervisor for all countries using the euro. The central bank would insist that the new institution not be too big to fail, meaning that taxpayers would not be on the hook for a bailout in case of a crisis.

Many Germans fear that if the merged bank failed, they would be called on to help save it, including taking on some of the debt incurred by the Italians. Germany has been notoriously opposed to taking on any shared debt, the only exception being in the wake of the coronavirus pandemic when it agreed to a common recovery fund worth 550 billion euros, or $543 billion at the time.

The European Central Bank has indicated that it would like to see the two sides continue talks. Responding to a question about it, the central bank’s president, Christine Lagarde, said it should be up to the market to decide, but expressed openness to the idea of a European multinational bank.

“Cross-borders mergers — banks that can actually compete at a scale, at a depth and at range with other institutions around the world, including the American banks and the Chinese banks — are in my opinion desirable,” Ms. Lagarde told a hearing at the European Parliament.

In addition, UniCredit is one of Europe’s most profitable banks, and it has experience operating in Germany through its ownership of HypoVereinsbank, a Munich-based lender that it acquired in 2008.

Europe lacks a large investment bank like JPMorgan Chase that is able to help direct private funds to large infrastructure projects and provide local capital to Europe’s start-ups, said Enrico Letta, the former prime minister of Italy, who wrote a report this year on Europe’s lack of competitiveness and the limitations of its single market.

“I think for the Germans, it’s important to know that integrating the financial markets and the banking system is the way to avoid them being asked to put public money in the common box,” he said.

The German government bought shares in Commerzbank in 2009 to help shore up the institution in the wake of the global economic downturn. It decided in September to begin selling off its shares, but was blindsided by the speed with which UniCredit moved to position itself for a takeover.

Mr. Scholz had called the Italian bank’s move an “unfriendly attack,” but the German government has since tried to row back its opposition.

Commerzbank has “achieved great success in strengthening profitability and modernizing its structures,” said Christian Lindner, the country’s finance minister. “And that is why we, as shareholders, continue to believe that Commerzbank’s strategy of independence is the right one.”

Germany increasingly appears to be isolated in its position, while others welcome the possible merger as a precedent toward further integration in the world of European finance.

“To me, it’s more about the ability of Europe to accept cross-border consolidation,” said Marco Troiano, the head of financial institutions at the credit ratings agency Scope Ratings. “The perception that a domestic champion in Germany can be acquired by another European bank, I think that’s very important.”

“If it happens,” he added, “it’s going to be very, very difficult for any other country later on to to put up walls.”

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