FRANKFURT, Sept 19 (Askume) – Andrea Orcel has for decades been the “rainmaker” CEOs turn to for advice on the big deals that are reshaping the banking landscape.
Now, as chief executive of UniCredit SA (CRDI.MI) , the Italian has given himself his biggest test yet — overcoming Europe’s deep political resistance to cross-border mergers.
Last week, the Italian bank of Auxerre acquired Commerzbank (CBKG.DE)
UniCredit’s initiative (named “Flash” after Auxerre’s dog)It sparked a search for direction in Berlin, protests from unions and a rescue strategy for Germany’s second-largest listed bank.
Oser now wants to begin talks on a merger that he says would create “a very strong competitor” in Germany. His move follows years of calls in Europe for its banks to become more competitive with bigger rivals in the United States and Asia.
He faced heavy obstacles.
Cross-border transactions in Europe’s banking sector have been hampered by a number of factors, including years of extremely low margins that have hampered banks’ efforts. Politicians’ preference for domestic “champions” also reinforces regulatory barriers to the free flow of resources across borders .
UniCredit had overcome a hurdle in its turnaround. Unlike its competitors, the bank was highly profitable and had the financial strength to pursue bold mergers.
But national politics will be the toughest task.
“Banking services are expensive in most European countries because they are concentrated in the hands of a small number of local banks,” said Karel Lanoue of the Center for European Policy Research.
“Germany’s reaction to UniCredit’s interest in Commerzbank reflects its resistance to change,” Lannoo said. “The Italians came to teach the Germans a lesson about free markets, but the Germans didn’t like it.”
Some in the German government were upset that UniCredit had secretly increased its stake by 9% overnight, a source told Askume.
UniCredit said the move comes at a critical time for Germany, which has one of the most unpopular governments in recent history and is preparing for national elections next year.
The recent rise of far-right and far-left parties has weakened the three-party coalition, especially its smallest member, the Free Democrats, which controls the Treasury.
Meanwhile, people familiar with the matter said Rome is positive about Milan-based UniCredit’s efforts to build a large European bank , as long as it keeps its core business in Italy.
Still, Italy is keeping its distance and has taken no steps to support UniCredit, a senior official told Askume.
“National blindness”
The partnership between UniCredit and Commerzbank will be the largest European cross-border banking deal since the global financial crisis.
Orcel believes that UniCredit’s existing ties in Germany – it already owns German bank HVB – and the ambitions of the combined group will reassure politicians.
“Europe needs banks that can support every industry and the growth of Europe so that we can become an economic bloc that can stand up to the United States and China,” Orser told Bloomberg last week.
It echoes a long-standing message from officials in Brussels, Europe’s political gathering place.
Last week, former European Central Bank President Mario Draghi urged the EU to remove barriers to cross-border banking in a wide-ranging report on improving Europe’s competitiveness.
Auxerre withdrew from an initial deal to buy troubled Monte dei Paschi in 2021, dealing a blow to then-Italian Prime Minister Draghi’s efforts to solve the bank’s long-term problems but he was unwilling to compromise.
UniCredit has sued its main regulator, the European Central Bank, which ordered the withdrawal from Russia.
Facing heavy resistance in Germany, Oser on Thursday softened his stance and denied hostilities.
If he manages to get the deal through, it could change minds elsewhere in Europe too.
Sebastiano Pirro, chief investment officer at Algebris, said: “Imagine if someone bid for the government’s shares in Monte dei Paschi today, they would never succeed.”
“If (France’s) BNP Paribas makes a bid, it’s not possible. They would like to keep it domestic. But if UniCredit acquires a German bank, all options are open,” Pirro said of his defense, noting UniCredit is an investor in Commerzbank.
“Work in progress”
Orcel’s next challengeApproval has to be obtained from the European Central Bank to buy up to 30% of Commerzbank’s shares . Analysts believe that such a deal has been under consideration for years, so this approval will not hinder them.
“A European single market for financial services is a work in progress, but mergers such as UniCredit and Commerzbank will help make it a reality,” said Nicolas Bellon of Brussels think tank Brueghel.
Some question whether Auxerre should even try to reach a compromise.
Robeco fund manager Patrick Lemmens, who owns shares in UniCredit, said mergers and acquisitions “have to be complementary; they have to be voluntary and they often have to happen in the same country.”
“When you cross borders and there’s not even a little bit of overlap, it makes it a lot more difficult.”
