Those naive enough to think Germany swore off nationalism for good in 1945 might struggle to explain Berlin’s outraged reaction this week to UniCredit’s stealthy bid for Commerzbank. News that the Milan-based institution, through overt and covert mean, was close to a one-fifth holding in Germany’s second largest bank prompted howls of protest from leading German politicians – on both sides of the Atlantic.
Chancellor Olaf Scholz took time out from the United Nations (UN) general assembly in New York to warn that “unfriendly attacks and hostile takeovers are not a good thing for banking”. Back in Berlin, his liberal finance minister Christian Lindner suggested that UniCredit’s approach was “stylistically unusual”.
No more stylistically unusual, critics suggest, than how Berlin’s ruling coalition got to this point. Facing multibillion holes in his budget, Mr Lindner ordered his officials to start the long-delayed sale of the German state’s stake in Commerzbank, dating back to the 2008-2010 banking crisis.
After organising an auction of a 4.5 per cent stake, roughly a quarter of Germany’s total holding, Berlin appeared surprised at having to follow through its end of the auction process and sell to the highest bidder: UniCredit. At that same moment the wily Andrea Orcel, UniCredit group chief executive officer (CEO), revealed his institution had quietly accumulated another 4.5 per cent via derivative-linked contracts and was seeking permission to increase that stake still further.
Berlin’s surprise is in itself surprising given how ING, BNP Paribas and UniCredit have all expressed an interest in Germany’s Commerzbank stake whenever it decided to sell. Less surprising was Berlin’s annoyance at UniCredit’s next big reveal on Monday: that it had indirectly acquired access to a further 11.5 per cent of Commerzbank shares.
With regulatory approval, UniCredit’s 21 per cent stake in Commerzbank would make it the largest shareholder, nearly double the federal government’s remaining 12 per cent. Once UniCredit’s shareholding reaches 30 per cent, something Commerzbank and Berlin are determined to prevent, UniCredit is legally obliged to submit a public takeover bid.
The raid from across the Alps has caused uproar in Frankfurt, and the surrounding state of Hesse.
Its governor Boris Rhein, of the centre-right Christian Democratic Union (CDU), suggested the “negligent” Scholz-Lindner auction had “surrendered a central financier of German SMEs to the interests of a foreign bank”.
“We cannot allow a sell-off of our flagship,” he told the Handelsblatt newspaper.
Commerzbank chairman Jens Weidmann, who oversaw the banking crisis state buy-in as ex-chancellor Angela Merkel’s financial adviser, expressed concern for the bank’s independence while unions fear large job cuts.
Seasoned Frankfurt analysts are less emotional than bank employees or politicians, seeing it as a logical consequence of the Italian bank’s main strength and the German bank’s key weakness: profitability. “I can’t see how the authorities can prevent a takeover or what relevant reason the economics ministry could offer,” said Dieter Hein, Frankfurt-based banking analyst with Fairesearch. “In such matters, national pride plays as much of a role here as elsewhere.”
Standing proud at 260 metres, Sir Norman Foster’s Commerzbank tower is a landmark on the Frankfurt landscape. But the bank’s roots stretch back 154 years to Hamburg, then Düsseldorf. It only moved to Frankfurt in 1990 and today is Germany’s second-largest bank with revenues of €10.5 billion and 42,000 employees, around 38,000 of whom work in Germany.
For much of its time in Frankfurt, however, Commerzbank has been stuck in a low-profit identity crisis, battling a fragmented banking market where public-owned savings and state banks still play a huge role as lenders and political players.
Looking around for ideas, Commerzbank made several failed attempts at pan-European banking co-operations in the 1990s: with France’s Crédit Lyonnais and Société Générale and NatWest in the UK.
Analysts credit the departing CEO, Manfred Knof, for sharpening Commerzbank’s focus and moving towards levels of profitability nearing European norms.
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He was battling a disastrous legacy, triggered by Commerzbank’s takeover of Dresdner Bank in 2009, months after the collapse of Lehmann Brothers. Dresdner’s problematic balance sheet compounded Commerzbank’s own failed forays into investment banking and threatened the institution’s existence.
In return for a €18 billion leg-up, the German state took a 25 per cent “silent participation” stake. Starting the sell-off of its Commerzbank stake has triggered the very takeover bid previously confined to business page speculation.
Non-sentimental German analysts see UniCredit as the ideal partner for Commerzbank, given the Milanese know the German market and have form in shocking German politicians. In 2005, in a shock-and-awe move, UniCredit snapped up Bavaria’s historic HypoVereinsbank (HVB) for €15 billion. Since then the once-proud institution’s workforce has been halved, profitability is up and all strategic decisions are made in Milan.
For analyst Dieter Hein, a similar fate may now loom for Commerzbank, as UniCredit’s CEO Andrea Orcel waits until Germany accepts his banking reality check. “The old Frankfurt boys’ club has been unable to turn around Commerzbank,” argued Hein. “Commerzbank’s days as an independent financial institution are numbered.”
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